Selected sales and operating data for three divisions of different structural engineering firms are given below: Division
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Question:
Selected sales and operating data for three divisions of different structural engineering firms are given below:
Division A | Division B | Division C | |
---|---|---|---|
Sales | $ 16,250,000 | $ 29,000,000 | $ 21,000,000 |
Average operating assets | $ 3,250,000 | $ 7,250,000 | $ 5,250,000 |
Net operating income | $ 763,750 | $ 348,000 | $ 630,000 |
Minimum required rate of return | 6.00% | 6.50% | 12.00% |
Required:
Compute each divisions margin, turnover, and return on investment (ROI).
Compute each divisions residual income (loss).
Assume each division is presented with an investment opportunity yielding a 7% rate of return.
If performance is being measured by ROI, which division or divisions will accept the opportunity?
If performance is being measured by residual income, which division or divisions will accept the opportunity?
Related Book For
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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