Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama $ 10,600,000 $ 742,000 $ 2,650,000 $ 36,000,000 $ 3,240,000 $ 18,000,000 Sales Net operating income Average operating assets Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed?

Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama $ 10,600,000 $ 742,000 $ 2,650,000 $ 36,000,000 $ 3,240,000 $ 18,000,000 Sales Net operating income Average operating assets Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 9,800,000 $ 28,000,000 Net operating income $ 588,000 $ 2,240,000 Average operating assets $ 2,450,000 $ 14,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 14%. Compute the residual income for each division. 3. Is Yokohama’s greater amount of residual income an indication that it is better managed? Osaka Yokohama ROI % % Osaka Yokohama Residual income
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