a. Based on the data above, compute the ROI for the Eastern Division and the Western Division. Please use the Du Pont Model. 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? c. 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
a. Based on the data above, compute the ROI for the Eastern Division and the Western Division. Please use the Du Pont Model.
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?
c. What is the advantage of using ROI rather than the dollar amount of income from operations to evaluate the performance of a division?
d. When a company decentralizes, what is the primary challenge that it faces?
e. Compute the Eastern Division’s residual income in the space below. The minimum acceptable
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