Consider the following data for two divisions of the same company:
| |
North Woods
|
Midwest
|
|
Sales
|
$3,000,000
|
$10,000,000
|
|
Average operating assets
|
1,000,000
|
3,000,000
|
|
Operating income
|
140,000
|
330,000
|
|
Minimum required return
|
8%
|
8%
|
Required
1. Compute residual income for each division.
2. Compute ROI for each division.