Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:

Divisions

Osaka Yokohama

Sales $10,400,000 $34,000,000

Net operating income $520,000 $2,380,000

Average operating assets $2,600,000 $17,000,000

Required:

1. For each division, compute the return on investment (ROI) in terms of margin and turnover.

2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 12%. Compute the residual income for each division.

3. Is Yokohama's greater amount of residual income an indication that it is better managed?