Presented below is selected information for three regional divisions of Medina 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 16%.
(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 additionalinvestment?

Divisions West $300,000 500,000 400,000 $140,000 360,000 210,000 $2,000,000 North South Contribution margin Controllable margin Average operating assets Minimum rate of return $1,000,000 13% $1,500,000 1090 16%