Compute the return on investment for each division. (Round ROI to 0 decimal plac

Question

Compute the return on investment for each division. (Round ROI to 0 decimal places, e.g. 15.) Compute the residual income for each division. (Round final answers to 0 decimal places, e.g. 1, 255.) Assume that each division has an investment opportunity that would provide a rate of return of 19 %. if ROI is used to measure performance, which division or divisions will probably make the additional investment? If residual income is used to measure performance, which division or divisions will probably make the additional investment?

Explanation / Answer

Return on Investment = Net Income*100/ Average Operating Assets North West South Controllable Margin 139300 360100 209600 Average Operating Assets 995000 1500417 1497143 ROI 139300/995000 360100/1500417 209600/1497143 ROI 14% 24% 14% Minimum Rate of Return 12% 14% 8% Income 119400 210058.4 119771.4 Operating Assets* Rate of return Residual Income 19900 150041.6 89828.56 Controllable margin- income

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