Natural Bounty Corporation operates three divisions that process and bottle natural fruit juices. The historical-cost accounting system reports the following information for 2020:

Natural Bounty estimates the useful life of each plant to be 12 years, with no terminal disposal value. The straight-line depreciation method is used. At the end of 2020, the passion fruit plant is 10 years old, the kiwi fruit plant is 4 years old, and the mango fruit plant is 2 years old. An index of construction costs over the 10-year period that Natural Bounty has been operating 12010 year@end = 1002 is as follows:

Required

Given the high turnover of current assets, management believes that the historical-cost and current-cost measures of current assets are approximately the same.
1. Compute the ROI ratio (operating income to total assets) of each division using historical-cost measures. Comment on the results.
2. Use the approach in Exhibit 24-2 (page 952) to compute the ROI of each division, incorporating currentcost estimates as of 2020 for depreciation expenses and long-term assets. Comment on the results.
3. What advantages might arise from using current-cost asset measures as compared with historicalcost measures for evaluating the performance of the managers of the three divisions?

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Revenues Operating costs (excluding plant depreciation) Plant depreciation Operating income Current assets Long-term assets-plant Total assets Passion Fruit Division $1,300,000 500,000 240,000 $ 560,000 $ 300,000 480,000 $ 780,000 Kiwi Fruit Division $2,000,000 890,000 220,000 $ 890,000 $ 500,000 1,760,000 $2,260,000 Mango Fruit Division $2,550,000 1,200,000 230,000 $1,120,000 $ 600,000 2,300,000 $2,900,000