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
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 11E: The operating income and the amount of invested assets in each division of Conley Industries are as...
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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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