Presented below is selected information for three regional divisions of Medina Company.

		Divisions
		North			West			South
Contribution margin		$299,700			$499,800			$399,300
Controllable margin		$140,000			$359,100			$208,600
Average operating assets		$1,000,000			$1,890,000			$1,490,000
Minimum rate of return		12	%		15	%		8	%

a) Compute the return on investment for each division.

North Division			%
West Division			%
South Division			%

b) Compute the residual income for each division

Compute the return on investment for each division.

North Division			$
West Division			$
South Division			$

c) Assume that each division has an investment opportunity that would provide a rate of return of 16%.

1) If ROI is used to measure performance, which division of divisions will probably make the additional investment?

2) If residual income is used to measure performance, which division or divisions will probably make the additional investment?

Answer rating: 100% (QA)

Answer a Compute the return on investment for each division Return on Investment ROI Controllable Ma... View the full answer