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

Division

Osaka Yokohama

Sales $11,000,000 $40,000,000

Net operating income $880,000 $4,000,000

Average operating assets $2,750,000 $20,000,000

Required:

1. For each division, compute the return on investment (ROI) in terms of margin and turnover. (Do not round intermediate calculations. Enter your answers as a percent (i.e., 0.12 should be entered as 12).)

Osaka Yokohama

ROI % %

2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 18%. Compute the residual income for each division.

Osaka Yokohama

Average operating assets Net operating income Minimum required return on average assets Residual Income

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

Yes

No