Selected sales and operating data for three divisions of different structural engineering companies are given below: Division
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Question:
Selected sales and operating data for three divisions of different structural engineering companies are given below:
Division A | Division B | Division C | |||||||
Sales | ps | 12,840,000 | ps | 28,840,000 | ps | 26,050,000 | |||
average operating assets | ps | 3,210,000 | ps | 7,210,000 | ps | 5,210,000 | |||
operating margin | ps | 564,960 | ps | 346,080 | ps | 755,450 | |||
Minimum Required Rate of Return | 6.00 | % | 6.50 | % | 14.50 | % | |||
Required:
1. Calculate the return on investment (ROI) for each division using the formula indicated in terms of margin and turnover.
2. Calculate the residual profit (loss) for each division.
3. Suppose each division is presented with an investment opportunity that would generate a 7% rate of return.
to. If performance is measured by ROI, which division or divisions are likely to accept or reject the opportunity?
b. If performance is measured by residual income, which division or divisions are likely to accept or reject 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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