Three divisions of Jameson Co. report the following sales and operating data: Fitness Spa Athletic Wear Training Services $560,000 $810,000 Sales $500,000 Average operating assets Operating income $112,000 $100,000 $ 22,400 $162,000 $ 32,400 16% $ 25,000 14% Minimum

Transcribed Image Text:

Three divisions of Jameson Co. report the following sales and operating data: Fitness Spa Athletic Wear Training Services $560,000 $810,000 Sales $500,000 Average operating assets Operating income $112,000 $100,000 $ 22,400 $162,000 $ 32,400 16% $ 25,000 14% Minimum required rate of return 14% Required: 1. Compute the ROI for each division, using the formula stated in terms of margin and turnover. ROI Fitness training % Spa services % Athletic wear % 2. Compute the residual income for each division. Fitness Training Spa Services Athletic Wear Residual income Three divisions of Jameson Co. report the following sales and operating data: Fitness Spa Athletic Wear Training Services $560,000 $810,000 Sales $500,000 Average operating assets Operating income $112,000 $100,000 $ 22,400 $162,000 $ 32,400 16% $ 25,000 14% Minimum required rate of return 14% Required: 1. Compute the ROI for each division, using the formula stated in terms of margin and turnover. ROI Fitness training % Spa services % Athletic wear % 2. Compute the residual income for each division. Fitness Training Spa Services Athletic Wear Residual income 3. Assume that each division is presented with an investment opportunity that would yield a rate of return of 21%. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Fitness Training Spa Services Athletic Wear b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Fitness Training Spa Services Athletic Wear 3. Assume that each division is presented with an investment opportunity that would yield a rate of return of 21%. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Fitness Training Spa Services Athletic Wear b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Fitness Training Spa Services Athletic Wear

• Expert Answer

1 Fitness Training Spa Services Athletic Wear Operating Income 22400 32400 25 View the full answer