Question
Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Division Queensland New South Wales Sales $ 1,800,000 $ 2,499,000
Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below:
Division | ||||
Queensland | New South Wales | |||
Sales | $ | 1,800,000 | $ | 2,499,000 |
Average operating assets | $ | 600,000 | $ | 510,000 |
Net operating income | $ | 180,000 | $ | 174,930 |
Property, plant, and equipment (net) | $ | 260,000 | $ | 210,000 |
Required:
1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover.
2. Which divisional manager seems to be doing the better job?
Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year, the company had net operating income of $490,000 on sales of $1,800,000. The companys average operating assets for the year were $2,000,000 and its minimum required rate of return was 13%.
Required:
Compute the companys residual income for the year.
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