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Simply Sweets Inc. has two different product lines, cupcakes and cookies. The following is the most recent financial information Cupcakes Cookies Total sales $ 3

Simply Sweets Inc. has two different product lines, cupcakes and cookies. The following is the most recent financial information
Cupcakes Cookies
Total sales $300,000 $500,000
Net operating income $15,000 $50,000
Average operating assets $100,000 $250,000
The company has indicated that the minimum required return for any product line it offers is 16%.
A. Compute the ROI of each product line stated in terms of margin and turnover. Round to one decimal place. Which product line appears to be doing better and why? 6 marks
Cupcakes Cookies
Margin
Turnover
ROI
Better division
Reason
b. Calculate the residual income of each product line. Which product line appears to be doing better and why? 6 marks
residual income
better decision
why
c. Each division has been presented with a new investment opportunity which will generate a return on investment of 16%. Indicate if each product line manager would accept or reject the opportunity if first, they are evaluated using ROI and second, if they are evaluated using residual income
cupcakes cookies
roi
residual income

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