Oatley Fabrics Company has two retail divisions, which reported the following results for last year: Furnishing DivisionDressmaking
Question:
Oatley Fabrics Company has two retail divisions, which reported the following results for last year:
Furnishing DivisionDressmaking Division
Profit.........................................$1,350,000............................$300,000
Average invested capital..................$9,000,000.........................$1,500,000
ROI..................................................15%..................................20%
Required:
1. Which was the more successful division? Think carefully about this, and explain your answer.
2. Calculate each division's residual Income under each of the following assumptions about the firm's minimum required rate of return:
(a) 12 per cent.
(b) 15 per cent.
(c) 18 per cent.
Step by Step Answer:
Management Accounting
ISBN: 9781760421144
7th Edition
Authors: Kim Langfield Smith, Helen Thorne, David Alan Smith, Ronald W. Hilton