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Compute roi for the eastern division and western division

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Reference no: EM132773887

Divisional income statements for the year 2006 for the two divisions of a company appear below.

                                       Eastern Division                 Western Division

Sales                          $5,000,000                       $4,500,000

Operating Expenses         4,000,000                     3,100,000

Operating Profit             $1,000,000                     $1,400,000

Invested Assets             $6,000,000                     $8,000,000

Problem a. Based on the data above, compute the ROI for the Eastern Division and the Western Division. Please use the Du Pont Model/Formula. Show all work and round to second decimal places.

Problem b. The company is planning to invest an additional $600,000 in assets in one or the other of the divisions. Which division should the company expand? Why?

Problem c. What is the advantage of using ROI rather than the dollar amount of income from operations to evaluate the performance of a division?

Problem d. When a company decentralizes, what is the primary challenge that it faces? Explain briefly. A few sentences or two should do it.

Reference no: EM132773887

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