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Pool Accessories, Inc., has two divisionsFurniture and Supplies. Segmented income statement information for the most recent fiscal year ended December 31 is shown below. Assume
Pool Accessories, Inc., has two divisionsFurniture and Supplies. Segmented income statement information for the most recent fiscal year ended December 31 is shown below. Assume the Furniture division had average operating assets totaling $6,500,000 for the year, and the Supplies division had average operating assets of $1,750,000. Segmented Income Statement for the Fiscal Year Ended December 31 Furniture Div Supplies Div Sales $3.000,000 $1,000,000 Cost of Goods Sold. 1,600,000. 430,000 Gross Margin. $1,400,000. $570,000 Allocated Overhead. 375,000. 125,000 Sells and Adm Expenses 250,000. 200,000 Operating Income. $775,000. $245,000 Income Tax Expense (30%) 232,500. 73,500 Net Income. $542,500. $171,500 Calculate ROI for each division. What does ROI tell us about each division? Indicate why this measure is useful in evaluating investment centers
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