Problem: Milano Corporation has three operating divisions and requires a 12% rreturn on all investments. Selected information is presented here:
a. Calculate the missing amounts for each division.
b. Comment on the relative performance of each division.
c. Provide an example to show how residual income improves decision making at the division level
Division A Division B Division C
Revenues........ $500,000 ? ?
Operating Income $60,000 ? $80,000
Operating Assets $250,000 $600,000 ?
Margin ? 12% ?
Turnover ? 1turn 2 turns
ROI ? ? ?
Residual Income ? ? $20,000