For each subunit, calculate Return on Investment, DuPont components of Return on Investment, and Residual Income. Then provide a final performance ranking of the subunits by first, second, and third place and explain why you ranked them in that way.
For performance evaluation, Victory Inc. considers each of its three vacation resorts separately. Each is considered an Investment Center. “Fun” Resort had Revenue of $1,200,000 and Variable Costs of $310,000 and Fixed Costs of $650,000 so the subunit’s Operating Income was $240,000. “Pamper” Resort had Revenue of $3,185,000 and Variable Costs of $995,000 and Fixed Costs of $1,680,000 so the subunit’s Operating Income was $510,000. “Relax” Resort had Revenue of $1,400,000 and Variable Costs of $375,000 and Fixed Costs of $725,000 so the subunit’s Operating Income was $300,000.
REQUIRED:
For each subunit, calculate Return on Investment, DuPont components of Return on Investment, and Residual Income. Then provide a final performance ranking of the subunits by first, second, and third place and explain why you ranked them in that way.
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