Pierre Ltd is a catering business owned by well-known chef Pierre Boudin. It is organised as two divisions, each with its own manager. There is the Shop Division, managed by Louise Lane, that runs retail outlets in a number of shopping centres throughout the city, and the Catering Division, managed by Brett Spark, that provides food for corporate functions, parties and public events. Pierre is considering going into semi-retirement and wants one of the managers to run the overall business.

Pierre has decided to assess the return on investment of the two divisions and to hand over the management of Pierre Ltd to whichever manager runs the division with the higher return on investment. Relevant information for the divisions is as follows.

Required

(a) Which manager should Pierre appoint to take over management of the company?

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Sales revenue Selling & administrative expenses Interest expense Profit before tax Shop Division $ 1 200 000 800 000 Catering Division $ 900 000 600 000 30 000 40 000 370 000 260 000 110 000 80 000 260 000 180 000 Average total assets $ 1 100 000 $ 800 000 Tax expense Profit