Three divisions of Jameson Co. report the following sales and operating data: Fitness Training Spa Services Sales $640,000 $840,000 Average operating assets $160,000 $210,000 Athletic Wear $700,000 $140,000 Operating income $ 25,600 $ 33,600 $ 35,000 Minimum required rate of return 13% 15% 13% Required: 1. Compute the ROI for each division, using the formula stated in terms of margin and turnover. ROI Fitness training % Spa services % Athletic wear % 2. Compute the residual income for each division. Fitness Training Spa Services Athletic Wear Residual income 3. Assume that each division is presented with an investment opportunity that would yield a rate of return of 20%. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Fitness Training Spa Services Athletic Wear

Three divisions of Jameson Co. report the following sales and operating data: Fitness Training Spa Services Sales $640,000 $840,000 Average operating assets $160,000 $210,000 Athletic Wear $700,000 $140,000 Operating income $ 25,600 $ 33,600 $ 35,000 Minimum required rate of return 13% 15% 13% Required: 1. Compute the ROI for each division, using the formula stated in terms of margin and turnover. ROI Fitness training % Spa services % Athletic wear % 2. Compute the residual income for each division. Fitness Training Spa Services Athletic Wear Residual income 3. Assume that each division is presented with an investment opportunity that would yield a rate of return of 20%. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Fitness Training Spa Services Athletic Wear

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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