considered an investment center). Investment Center Electronics Sporting Goods Sales Net Income Average Invested Assets $ 10,000,000 $ 8,000,000 750,000 800,000 $3,750,000 5,000,000 (1) Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? (2) Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? Residual income is clearly explained in your text, so look it up and give this a try. (3) Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on assets. Should the new investment opportunity be accepted? Explain.
considered an investment center). Investment Center Electronics Sporting Goods Sales Net Income Average Invested Assets $ 10,000,000 $ 8,000,000 750,000 800,000 $3,750,000 5,000,000 (1) Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? (2) Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? Residual income is clearly explained in your text, so look it up and give this a try. (3) Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on assets. Should the new investment opportunity be accepted? Explain.
Chapter12: Balanced Scorecard And Other Performance Measures
Section: Chapter Questions
Problem 9EA: Classify each of the following performance measures into the balanced scorecard perspective to which...
Related questions
Question
100%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Define the return on investments.
VIEWStep 2: Determine the return on investment for both the investment centers.
VIEWStep 3: 2. Estimate the residual income of the investment centers.
VIEWStep 4: 3. Determine whether a investment with ROI 15% in electronics department can be accepted.
VIEWSolution
VIEWStep by step
Solved in 5 steps with 2 images
Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub