Question
Three divisions of Jameson Co. report the following sales and operating data: fitness training spa services athletic wear sales $540,000 $790,000 $650,000 average operating assets
Three divisions of Jameson Co. report the following sales and operating data:
| fitness training | spa services | athletic wear | |
| sales | $540,000 | $790,000 | $650,000 |
| average operating assets | $108,000 | $158,000 | $130,000 |
| operating income | $27,000 | $39,500 | $39,000 |
| minimum required rate of return | 14% | 16% | 14% |
Required: 1. Compute the ROI for each division, using the formula stated in terms of margin and turnover.
Fitness training? Spa Services? Athletic wear?
2. Compute the residual income for each division.
Fitness training? Spa Services? Athletic wear?
3. Assume that each division is presented with an investment opportunity that would yield a rate of return of 26%.
a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity?
Fitness training? Spa Services? Athletic wear?
b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity?
Fitness training? Spa services? Athletic wear?
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
13th Edition
9780470374948, 470423684, 470374942, 978-0470423684
