Three divisions of Jameson Co. report the following sales and operating data Ath

Question

Three divisions of Jameson Co. report the following sales and operating data Athletic ear Spa Services $680,000 $930,000 $ 650,000 $136,000 $ 186,000 $130,000 $ 27,200 37,200 32,500 Fitness Training Sales Average operating assets Operating income Minimum required rate of return 10% 12% 10% Required. 1. Compute the ROl 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

Explanation / Answer

1) ROI Fitness Training 20% Spa services 20% Athletic wear 25% ROI = operating income/average operating assets Fitness Spa Athletic 2) training services wear Residual income 13600 14880 19500 Residual income = net operating income-(average operating assets*                                                                               minimum rate of return) 3-a) Fitness Training accept Spa services accept Athletic wear Reject b) Fitness Training accept Spa services accept Athletic wear accept

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