Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 9,800,000 $ 28,000,000 Net operating income $ 588,000 $ 2,240,000 Average operating assets $ 2,450,000 $ 14,000,000 Required: 1a. For each division, compute the return on investment (ROI) in terms of margin and turnover. Osaka Yokohama ROI ?# % ?# % 1b. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 14%. Compute the residual income for each division. Osaka Yokohama Residual income ?# ?# 1c. Is Yokohama’s greater amount of residual income an indication that it is better managed? YES
Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 9,800,000 $ 28,000,000 Net operating income $ 588,000 $ 2,240,000 Average operating assets $ 2,450,000 $ 14,000,000 Required: 1a. For each division, compute the return on investment (ROI) in terms of margin and turnover. Osaka Yokohama ROI ?# % ?# % 1b. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 14%. Compute the residual income for each division. Osaka Yokohama Residual income ?# ?# 1c. Is Yokohama’s greater amount of residual income an indication that it is better managed? YES
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 16E
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Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:
Division
Osaka Yokohama
Sales $ 9,800,000 $ 28,000,000
Net operating income $ 588,000 $ 2,240,000
Average operating assets $ 2,450,000 $ 14,000,000
Required:
1a. For each division, compute the return on investment (ROI) in terms of margin and turnover.
Osaka Yokohama
ROI ?# % ?# %
1b. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 14%. Compute the residual income for each division.
Osaka Yokohama
Residual income ?# ?#
1c. Is Yokohama’s greater amount of residual income an indication that it is better managed?
YES
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