Selected sales and operating data for three divisions of different structural engineering firms are given as follows:Division ADivision BDivision C$ 5,000, 000$ 1,000,000%$4SalesAverage operating assetsNet operating incomeMinimum required rate of return$ 9,000,000$ 4,500,0002$$ 8, 100, 000$ 1,620, 000109, 35013.00%205,000$4729,00016.20%16.00%Required:1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.2. Compute the residual income (loss) for each division.3. Assume that each division is presented with an investment opportunity that would yield a 16% rate of return.a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?esComplete this question by entering your answers in the tabs below.Req 1ReqReq ЗAReq 3BCompute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should beindicated by a minus sign.)Division ADivision BDivision CResidual income (loss)

ROI= Net income/Operating assets Residual income= Net income - (Operating assets x Required return)

Answered: Division A $ 5,000,000 $ 1,000, 000 $…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.5.3P

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