Calculation of return on investment and residual income

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Reference no: EM1317451

Investment center analysis; ROI and residual income

Milano Corporation has three operating divisons and requires a 12% return on all investments. Selected information is presented here:

Divison A Division B Division C

Revenues $500,000

Operating Income $60,000 $80,000

Operating Assets $250,000 $600,000

Margin 12%

Turnover 1 turn 2 turns

ROI

Residual Income $20,000

Required:

a. Calculate the missing amounts for each division

b. Comment on the relative performance of each division

c. Provide an example to show how residual income improves decision making at the divisional level

Reference no: EM1317451

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