1 answer

Presented below is selected information for two regional divisions of Yono Company: Divisions North West Sales...

Question:

Presented below is selected information for two regional divisions of Yono Company:

Divisions
North West
Sales $401,800 $538,000
Operating income 61,811 102,968
Average investment 113,000

244,000

Calculate the return on investment for each division and then break it down into the return on sales and investment turnover. (Round Return on sales to 1 decimal places, e.g. 5.2% and other answers to 2 decimal place, e.g. 5.25 or 5.25%.)

North Division
Return on investment %
Return on sales %
Investment turnover times
West Division
Return on investment %
Return on sales %
Investment turnover times

  

  

What is the residual income for each division if the required rate of return is 15%?

Division
North West
Residual Income $

  

  

Assume that each division has an investment opportunity that would provide a rate of return of 23%. If the ROI is used to measure performance, which division or divisions will probably make the additional investment?

  

  

Assume the same opportunity as in (c), except that residual income is used to measure performance. Which division or divisions will probably make the additional investment?


Answers

Particulars North Division West Division Return on Investment = Operating Income/Average Investment Operating Income 61811 $

If you have any doubts please comment on the answer.

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