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operating assets ting income required rate of return. Division A $ 12,600,000 $ 3,150,000 $ 516,600 9.00% Division B $ 35,750,000 $ 7,150,000 $ 572,000 9.50% Division C $ 20,600,000 $ 5,150,000 $ 597,400 11.60%

operating assets ting income required rate of return. Division A $ 12,600,000 $ 3,150,000 $ 516,600 9.00% Division B $ 35,750,000 $ 7,150,000 $ 572,000 9.50% Division C $ 20,600,000 $ 5,150,000 $ 597,400 11.60%

FINANCIAL ACCOUNTING
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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Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 35,750,000 $ 7,150,000 $ 572,000 9.50% Division C $ 20,600,000 $ 5,150,000 $ 597,400 11.60% Sales Average operating assets Net operating income Minimum required rate of return Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 10% rate of return. a. If performance is being measured by ROI, which division or divisions will obably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Division A Division B Division C Req 3A Compute the margin, turnover, and return on investment (ROI) for each division. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Margin % do do do Division A $ 12,600,000 $ 3,150,000 $ 516,600 9.00% % Turnover Req 3B ROI < Req 1 % % Req 2 >
Transcribed Image Text:Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 35,750,000 $ 7,150,000 $ 572,000 9.50% Division C $ 20,600,000 $ 5,150,000 $ 597,400 11.60% Sales Average operating assets Net operating income Minimum required rate of return Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 10% rate of return. a. If performance is being measured by ROI, which division or divisions will obably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Division A Division B Division C Req 3A Compute the margin, turnover, and return on investment (ROI) for each division. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Margin % do do do Division A $ 12,600,000 $ 3,150,000 $ 516,600 9.00% % Turnover Req 3B ROI < Req 1 % % Req 2 >
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