Selected sales and operating data for three divisions of different structural engineering firms are given as follows:

Division A Division B Division C

Sales $ 12,440,000 $ 35,550,000 $ 25,550,000

Average operating assets $ 3,110,000 $ 7,110,000 $ 5,110,000

Net operating income $ 547,360 $ 639,900 $ 740,950

Minimum required rate of return 10.00 % 10.50 % 14.50 %

Required:

1. Compute the margin, turnover, and return on investment (ROI) for each division.

2. Compute the residual income (loss) for each division.

3. Assume that each division is presented with an investment opportunity that would yield a 11% rate of return.

a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity?

b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity?

Provide the missing data in the following table for a distributor of martial arts products: (Enter "Turnover" and "ROI" answers to 1 decimal place.) Division Alpha Bravo Charlie Sales $ 312,500 $ 31,250 $ 49,320 Net operating income Average operating assets Margin $ 453,000 5 % 5.0 % 9 % Turnover Return on investment (ROI) % 25.0 % 18.0 % Compute the margin, turnover, and return on investment (ROI) for each division. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Margin Turnover ROI Division A % % Division B % % Division C % % Reg 1 Req 2 Req Req 3B Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) Division A Division B Division C Residual income (loss) Assume that each division is presented with an investment opportunity that would yield a 11% rate of return. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C Assume that each division is presented with an investment opportunity that would yield a 11% rate of return. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C

Question

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Selected sales and operating data for three divisions of different structural engineering firms are given as follows:

	Division A			Division B			Division C
Sales	$	12,440,000		$	35,550,000		$	25,550,000
Average operating assets	$	3,110,000		$	7,110,000		$	5,110,000
Net operating income	$	547,360		$	639,900		$	740,950
Minimum required rate of return		10.00	%		10.50	%		14.50	%

Required:

1. Compute the margin, turnover, and return on investment (ROI) for each division.

2. Compute the residual income (loss) for each division.

3. Assume that each division is presented with an investment opportunity that would yield a 11% rate of return.

a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity?

b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity?

image text in transcribed

Provide the missing data in the following table for a distributor of martial arts products: (Enter "Turnover" and "ROI" answers to 1 decimal place.) Division Alpha Bravo Charlie Sales $ 312,500 $ 31,250 $ 49,320 Net operating income Average operating assets Margin $ 453,000 5 % 5.0 % 9 % Turnover Return on investment (ROI) % 25.0 % 18.0 % Compute the margin, turnover, and return on investment (ROI) for each division. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Margin Turnover ROI Division A % % Division B % % Division C % % Reg 1 Req 2 Req Req 3B Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) Division A Division B Division C Residual income (loss) Assume that each division is presented with an investment opportunity that would yield a 11% rate of return. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C Assume that each division is presented with an investment opportunity that would yield a 11% rate of return. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C