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Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 14,175,000 $ 7,087,500 $ 567,000 10% Sales Average operating assets Net operating income Minimum required rate of return Req 1 Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Complete this question by entering your answers in the tabs below. Req 2 Division A Division B Division C Division A $ 12,150,000 $ 3,037,500 $ 607,500 Margin Req 3A % % % 14% Req 3B Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 1 decimal place.) Turnover < Req 1 Division C $ 25,312,500 $ 5,062,500 $ 810,000 16% ROI % % % Reg 2 >

Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 14,175,000 $ 7,087,500 $ 567,000 10% Sales Average operating assets Net operating income Minimum required rate of return Req 1 Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Complete this question by entering your answers in the tabs below. Req 2 Division A Division B Division C Division A $ 12,150,000 $ 3,037,500 $ 607,500 Margin Req 3A % % % 14% Req 3B Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 1 decimal place.) Turnover < Req 1 Division C $ 25,312,500 $ 5,062,500 $ 810,000 16% ROI % % % Reg 2 >

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
Problem 32E: Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions:...
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Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 14,175,000 $ 7,087,500 $ 567,000 10% Division C $ 25,312,500 $ 5,062,500 $ 810,000 16% Sales Average operating assets Net operating income Minimum required rate of return Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Complete this question by entering your answers in the tabs below. Req 1 Division A $ 12,150,000 $ 3,037,500 $ 607,500 14% Req 2 Division A Division B Division C Req 3A Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 1 decimal place.) Margin Turnover % % % Req 3B Req 1 ROI % % % Req 2 >
Transcribed Image Text:Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 14,175,000 $ 7,087,500 $ 567,000 10% Division C $ 25,312,500 $ 5,062,500 $ 810,000 16% Sales Average operating assets Net operating income Minimum required rate of return Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Complete this question by entering your answers in the tabs below. Req 1 Division A $ 12,150,000 $ 3,037,500 $ 607,500 14% Req 2 Division A Division B Division C Req 3A Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 1 decimal place.) Margin Turnover % % % Req 3B Req 1 ROI % % % Req 2 >
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