Question: Kelfour Enterprises has divided its operations into two divisions. Relevant accounting data for each division is as follows: Divisions Sales Operating Assets Operating Income Western
Kelfour Enterprises has divided its operations into two divisions. Relevant accounting data for each division is as follows:
| Divisions | Sales | Operating Assets | Operating Income |
|---|---|---|---|
| Western Division | $ 150,000 | $ 100,000 | $ 15,000 |
| Eastern Division | $ 300,000 | $ 150,000 | $ 16,500 |
Kelfour has an additional $50,000 of funds to invest. The manager of the Western Division believes that she can invest the funds at a rate of return (ROI) of 14% while the manager of the Eastern Division has found a new investment opportunity that is expected to yield a 12% ROI. Currently Kelfour uses ROI as the sole measure of managerial performance. Based on this information
Multiple Choice
All of the answers represent true statements.
The CEO of Kelfour is likely to favor having the funds invested in the Western Division.
The manager of the Eastern division is likely to accept an offer to have the funds invested his department.
The manager of the Western division is likely to reject an offer to have the funds invested her department.
NOTE - Third answer choice is graded as wrong.
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