- A residual income of $0 would indicate that a division’s ROI was the same as the minimum required rate of return for the division a. True b. False
- A residual income of $0 would indicate that a division’s ROI was the same as the minimum required rate of return for the division a. True b. False
Related questions
Eacher Wares is a division of a major corporation. The followingdata are for the latest year of operations:
| Sales | $14,720,000 |
| Net operating income | $1,000,960 |
| Average operating assets | $4,000,000 |
| The company's minimum required rate of return | 14% |
Required:
a. What is the division's margin?
b. What is the division's turnover?
c. What is the division's return on investment (ROI)?
d. What is the division's residual income?
Rains Nickless Ltd. of Australia has two divisions that operatein Perth and Darwin. Selected data on the two divisions follow: |
Division | ||||
| Perth | Darwin | |||
| Sales | $ | 7,170,000 | $ | 20,600,000 |
| Net operatingincome | $ | 530,580 | $ | 1,297,800 |
| Average operatingassets | $ | 2,390,000 | $ | 10,300,000 |
| Required: | |
| 1. | Compute the return on investment (ROI) for each division.(Do not round intermediate calculations. Round your answersto 2 decimal places. Omit the "%" sign in yourresponse.) |
| Perth | Darwin | |
| ROI | % | % |
| 2. | Assume that the company evaluates performance using residualincome and that the minimum required rate of return for anydivision is 9%. Compute the residual income for each division.(Omit the "$" sign in your response.) |
| Perth | Darwin | |
| Residual income | $ | $ |
| 3. | Is the Darwin Divisionâs greater residual income an indicationthat it is better managed? | ||||
|
| 1a. Given the following data: |
| Average operating assets | $3,096,000 |
| Total liabilities | $356,040 |
| Sales | $1,548,000 |
| Contribution margin | $835,920 |
| Netoperating income | $417,960 |
| Return on investment (ROI) would be:
|
