Rains Nickless Ltd. has 2 divisions. Selected data on the 2 divisions follow:

	Perth	Darwin
Sales	$9,000,000	$20,000,000
Net Operating Income	$630,000	$1,800,000
Average operating assets	$3,000,000	$10,000,000

Required:

1) Compute the return on investment.

2) Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division.

3) Is the Darwin Division's greater residual income an indication that it is better managed? Explain.