White Inc. operates three separate manufacturing divisions that operate autonomously. For 2022, the company has a...
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White Inc. operates three separate manufacturing divisions that operate autonomously. For 2022, the company has a desired rate of return of 13%. Information for each division for 2022 was as follows: Sales Contribution margin Operating income Investment base Division A $12,250,000 2,975,000 2,625,000 17,500,000 Division B $8,750,000 2,520,000 1,575,000 15,750,000 Division C $17,500,000 6,125,000 3,883,600 26,600,000 Required: (A) What is the ROI for each division? Based on each division's ROI, rank them in order of profitability. (B) What is the residual income for each division? Based on each division's residual income, rank them in order of profitability. (C) Reviewing your calculations in (A) and (B), which division had the strongest performance for 2020 and why? (D) A new investment is available which will generate operating income of $55,000 with an investment of $500,000. Which division(s) would be interested in pursuing this investment if divisions are evaluated based on ROI? Which division (s) would bel interested in pursuing this investment if divisions are evaluated based on RI. White Inc. operates three separate manufacturing divisions that operate autonomously. For 2022, the company has a desired rate of return of 13%. Information for each division for 2022 was as follows: Sales Contribution margin Operating income Investment base Division A $12,250,000 2,975,000 2,625,000 17,500,000 Division B $8,750,000 2,520,000 1,575,000 15,750,000 Division C $17,500,000 6,125,000 3,883,600 26,600,000 Required: (A) What is the ROI for each division? Based on each division's ROI, rank them in order of profitability. (B) What is the residual income for each division? Based on each division's residual income, rank them in order of profitability. (C) Reviewing your calculations in (A) and (B), which division had the strongest performance for 2020 and why? (D) A new investment is available which will generate operating income of $55,000 with an investment of $500,000. Which division(s) would be interested in pursuing this investment if divisions are evaluated based on ROI? Which division (s) would bel interested in pursuing this investment if divisions are evaluated based on RI.
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answer A Return on InvestmentROI for each division is calculated as follows ROIOperating IncomeInves... View the full answer
Related Book For
Cost Management A Strategic Emphasis
ISBN: 978-0077733773
7th edition
Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins
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