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Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal
Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an percent cost of capital and beginningoftheyear investment when computing ROI and residual income. Ignore income taxes.
Division
Canal $ Lake $
Allocated corporate overhead $ $
Cost of goods sold
Divisional investment
R&D
Sales
Selling, general and administrative excluding R&D
Required:
Compute divisional income for the two divisions.
Calculate the operating margin, which is equivalent to the return on sales, for the two divisions.
Calculate ROI for the two divisions.
Compute residual income for the two divisions.
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