Selected sales and operating data for three divisions of three different companies are given below:
Division X Division Y Division Z
Sales $900,000 $750,000 $600,000
Average operation assets $600,000 $150,000 $200,000
Net operating income $ 54,000 $ 30,000 $ 10,000
Minimum required rate 10% 16% 8% of return
a. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. Show computations.
b. Compute the residual income for each division. Show computations.
c. Under which of these methods would they accept an opportunity with a 15 percent return. Show computations and details.