Problem - Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
|
Division A
|
Division B
|
Division C
|
|
Sales
|
$5,400,000
|
$10,800,000
|
$8,100,000
|
|
Average operating assets
|
$1,410,000
|
$5,500,000
|
$2,000,000
|
|
Net operating income
|
$295,000
|
$899,000
|
$320,000
|
|
Minimum required rate of return
|
14%
|
17%
|
16%
|
Required -
1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.
2. Compute the residual income for each division.