Presented below is selected information for three regional divisions of Yono Company.

Instructions:

(a) Compute the return on investment for each division.

(b) Compute the residual income for each division.

(c) Assume that each division has an investment opportunity that would provide a rate of return of \(19 \%\).
(1) If ROI is used to measure performance, which division or divisions will probably make the additional investment?
(2) If residual income is used to measure performance, which division or divisions will probably make the additional investment?

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Contribution margin Controllable margin Average operating assets Minimum rate of return North $ 300,000 $ 150,000 $1,000,000 13% Divisions West $ 500,000 $ 400,000 $2,000,000 16% South $ 400,000 $ 225,000 $1,500,000 10%