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Three divisions of BarbBar Co. report the following sales and operating data: 6 7 -- Fitness Training Spa Services Athletic Wear Sales $690,000 $890,000 $700,000
Three divisions of BarbBar Co. report the following sales and operating data: 6 7 -- Fitness Training Spa Services Athletic Wear Sales $690,000 $890,000 $700,000 Average Operating Assets $172,500 $222,500 $140,000 Operating Income $27,600 $35,600 $35,000 Minimum Required Rate of 12% 14% 12% Return Required: A) Compute the ROI fof each division, using the formula stated in terms of margin and turnover. Show your work. a 9 10 12 B) Compute the residual income for each division. Show your work. Paragraph T 1 For the next two questions (C & D), assume that each division is presented with an investment opportunity that would yield a rate of return of 19%. C) If performance is being measured by ROI, which division or divisions will probably accept the opportunity? If a division or divisions rejects the opportunity, please explain why. 7 D) If performance is being measured by residual income, which division or divisions will probably accept the opportunity? If a division or divisions rejects the opportunity, please explain why. E) The manager of the Spa division is stressed and says, "I want to do better but I do not understand how I can change my division's ROI - it's so complicated! Maybe it's time to look for a different job..." - Please help them out by giving them an idea or two about how to improve their ROI. Explain why these ideas would help
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