Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:     Division   Osaka Yokohama Sales $ 9,700,000 $ 27,000,000 Net operating income $ 776,000 $ 2,700,000 Average operating assets $ 2,425,000 $ 13,500,000     Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 17%. Compute the residual income for each division.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:

 

  Division
  Osaka Yokohama
Sales $ 9,700,000 $ 27,000,000
Net operating income $ 776,000 $ 2,700,000
Average operating assets $ 2,425,000 $ 13,500,000
 

 

Required:

1. For each division, compute the return on investment (ROI) in terms of margin and turnover.

2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 17%. Compute the residual income for each division.

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