Divisional income statements for the year 2020 for the two divisions of a company appear below. Eastern Division Western Division Sales $5,000,000 $4,500,000 Operating Expenses 3,800,000 3,000,000 Operating Profit $1,200,000 $1,500,000 Invested Assets $6,000,000 $8,000,000 1. Based on the data above, compute the ROI for the Eastern Division and the Western Division. Please use the Du Pont Model. Show all work and round to second decimal places. 2. 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? 3. What is the advantage of using ROI rather than the dollar amount of income from operations to evaluate the performance of a division?
Divisional income statements for the year 2020 for the two divisions of a company appear below.
Eastern Division Western Division
Sales $5,000,000 $4,500,000
Operating Expenses 3,800,000 3,000,000
Operating Profit $1,200,000 $1,500,000
Invested Assets $6,000,000 $8,000,000
1. Based on the data above, compute the
2. 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?
3. What is the advantage of using ROI rather than the dollar amount of income from operations to evaluate the performance of a division?
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