### Selected Sales and Operating Data for Divisions of Structural Engineering FirmsThe table below showcases sales and operating data for three different divisions (A, B, and C) of structural engineering firms.| | Division A | Division B | Division C ||---------------------|-----------------|------------------|-------------------|| **Sales** | $5,000,000 | $9,000,000 | $8,100,000 || **Average Operating Assets** | $1,000,000 | $4,500,000 | $1,620,000 || **Net Operating Income** | $205,000 | $729,000 | $109,350 || **Minimum Required Rate of Return** | 16.00% | 16.20% | 13.00% |### Required Tasks1. **Compute the Return on Investment (ROI):** - Calculate the ROI for each division using the formula stated in terms of margin and turnover.2. **Compute the Residual Income (Loss):** - Determine the residual income or loss for each division.3. **Investment Opportunity Evaluation:** - Each division is presented with an investment opportunity with a 16% rate of return. a. **Performance Evaluation by ROI:** - Determine which divisions would likely accept or reject the opportunity based on ROI. b. **Performance Evaluation by Residual Income:** - Determine which divisions would likely accept or reject the opportunity based on residual income.#### Instructions:- Complete the questions by entering your answers in the tabs below the requirements.### Interactive Element:- Tabs named Req 1, Req 2, Req 3A, and Req 3B are provided for inputting calculations and analyses for the respective tasks.- A scenario analysis box is available for entering assumptions about the divisions' responses to the investment opportunity based on residual income measures.This information will assist educational exercises involving financial analysis and decision-making in structural engineering firms.

Return on investment represents the return the company gets in return of the money invested.

Answered: Selected sales and operating data for…

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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The operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating income Invested Assets Retail Division $103,400 $470,000 Commercial Division 105,000 420,000 Internet Division 130,000 500,000 Assume that management has established a 10% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Operating income $103,400 $105,000 $130,000 Minimum acceptable operating income as a percent of invested assets Residual income $ $ $ b. Which division has the most residual income?
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Net operating income Minimum required rate of return Division A $6,300,000 $1,260,000 $ 340,200 20.00% Division B $10,300,000 $ 5,150,000 $ 968,200 18.80% Division C $9,400,000 $1,880,000 $ 249,100 17.00% Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. I Margin Turnover ROI Division A 5.40 % times % Division B % 2.00 times :% Division C % times % 2. Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign. Roui Division A Division B Division C Average operating assets Required rate of return % % % Required operating income Actual operating income Required operating income (above) Residual income (loss) 3. Assume that each division is presented with an investment opportunity that would y a. If performance is being…
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Residual Income The Commercial Division of Galena Company has operating income of $264,070 and assets of $549,000. The minimum acceptable return on assets is 13%. What is the residual income for the division?
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