E10-8 (Algo) Evaluating Managerial Performance Using Return on Investment, Residual Income [LO 10-4, 10-5]

Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division:

	Fruit Division			Flower Division
Sales revenue	$	1,500,000		$	2,250,000
Cost of goods sold and operating expenses		1,125,000			1,687,500
Net operating income	$	375,000		$	562,500
Average invested assets	$	3,125,000		$	2,343,750

Orange has established a hurdle rate of 8 percent. Required: 1-a. Compute each divisions return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each divisions operating income by $148,000. The total investment required is $2,400,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made. 3. Determine whether both managers will support the investment.

andgers will support Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Req3 Compute each division's return on investment (ROI) and residual income for last year. (Enter your ROI answers as a percentage rounded to two decimal places, i.e., 0.1234 should be entered as 12.34%.)) Flower Division Fruit Division % ROI Residual Income (Loss) Req 1A Req 1B > 3. Determine whether both managers will support the investment. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Reg 3 Determine which manager seems to be performing better. OFruit Division Flower Division Req 1A Reg 1B Reg 2 Reg 3 Suppose Orange is investing in new technology that will increase each division's operating income by $148,000. The total investment required is $2,400,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Show less Fruit Division Flower Division ROI % % Residual Income (Loss) Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Reg 3 Determine whether both managers will support the investment. Fruit Division Manager Flower Division Manager