Reference no: EM132642347
Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
Division A Division B Division C
Sales ........................................................... $12,000,000 $14,000,000 $25,000,000
Average operating assets ............................ $3,000,000 $7,000,000 $5,000,000
Net operating income .................................. $600,000 $560,000 $800,000
Minimum required rate of return .................. 14% 10% 16%
Required:
Problem 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.
Problem 2. Compute the residual income for each division.