Question 3

Hewlitt Inc. operates three separate candy manufacturing divisions that operate autonomously. Information for each division for 2020 was as follows: Lollipops Jellybeans Marshmallows Sales $8,750,000 $12,250,000 $17,500,000 Contribution margin 2,520,000 2,975,000 6,125,000 Operating income 1,500,000 2,625,000 3,906,000 Investment base 15,750,000 17,500,000 26,600,000 For 2020, the company has a desired rate of return of 14%. Required: (A) What is the ROI for each division? Based on each division's ROI, rank them in order of profitability. (B) What is the residual income for each division? Based on each division's residual income, rank them in order of profitability. (C) Reviewing your calculations in (A) and (B), which division had the strongest performance for 2020 and why