Task: Selected sales and operating data for three division of three different companies are given below:
Division X Division Y Division Z
Sales $900,000 $750,000 $600,000
Average operating $600,000 $150,000 $200,000
assets
Net operating $54,000 $30,000 $10,000
income
Min. required rate 10% 16% 8%
of return
Question 1: Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. Show computations.
Question 2: Computer the residual income for each division. Show computations.
Question 3: Under which of these methods would they accept an opportunity with a 15 percent return. Show computations and details.