Omar Sdn Bhd requires a return on capital of 15 percent. The following information is available for 2020: Division X Division Y Division Z Book Current Book Current Book Current Sales RM200,000 RM200,000 RM400,000 RM400,000 RM600,000 RM600,000 Income 24,000 20,000 32,000 34,000 37,500 39,000 Assets 120,000 160,000 180,000 200,000 450,000 435,000 Required: a. Compute return on investment using both book and current values for each division. (Round answer to three decimal places.) b. Compute residual income for both book and current values for each division. c. Does book value or current value provide the better basis for performance evaluation?
Omar Sdn Bhd requires a return on capital of 15 percent. The following information is available for 2020:
|
|
Division X |
Division Y |
Division Z |
|||
|
|
Book |
Current |
Book |
Current |
Book |
Current |
|
Sales |
RM200,000 |
RM200,000 |
RM400,000 |
RM400,000 |
RM600,000 |
RM600,000 |
|
Income |
24,000 |
20,000 |
32,000 |
34,000 |
37,500 |
39,000 |
|
Assets |
120,000 |
160,000 |
180,000 |
200,000 |
450,000 |
435,000 |
Required:
|
a. |
Compute |
|
b. |
Compute residual income for both book and current values for each division. |
|
c. |
Does book value or current value provide the better basis for performance evaluation? |
|
d. |
Which division do you consider the most successful? |
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