Question

The following financial data are for the evaluation of performance for Midwest Mining:
Average operating assets ..... $500,000
Net operating income ........ $65,000
Minimum required rate of return ... 10%
Midwest Mining currently uses return on investment to evaluate investment center managers. An accounting intern from the local university suggested to the controller that residual income may be a better performance measure.

REQUIRED
A. Calculate ROI for Midwest Mining.
B. Calculate residual income for Midwest Mining.
C. Write a brief memo to the controller discussing the advantages and disadvantages of the two measures.



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  • CreatedJanuary 26, 2015
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