E10-9 (Algo) Evaluating Managerial Performance Using Return on Investment, Residual Income [LO 10-4, 10-5]

Luke Company has three divisions: Peak, View, and Grand. The company has a hurdle rate of 6.51 percent. Selected operating data for the three divisions follow:

		Peak		View		Grand
Sales revenue	$	341,000	$	228,000	$	300,000
Cost of goods sold		199,000		105,000		190,000
Miscellaneous operating expenses		38,000		35,000		35,000
Average invested assets		1,200,000		890,000		1,035,000

Required: 1. Compute the return on investment for each division. 2. Compute the residual income for each division.