Leslie Corporation uses both ROI and residual income (RI) to measure performance. One of the company's divisions currently has $480,000 of capital invested in assets and is expected to earn operating income of $120,000 in the current period. The division is considering an investment in new equipment costing $345,000 that will likely increase its annual operating income by $45,000. The minimum ROI for all divisions within the company is 9%. 1. If the division does not purchase the equipment, its estimated ROI will be %. 2. If the division invests in the equipment, its ROI will likely decrease to

Leslie Corporation uses both ROI and residual income (RI) to measure performance. One of the company's divisions currently has $480,000 of capital invested in assets and is expected to earn operating income of $120,000 in the current period. The division is considering an investment in new equipment costing $345,000 that will likely increase its annual operating income by $45,000. The minimum ROI for all divisions within the company is 9%. 1. If the division does not purchase the equipment, its estimated ROI will be %. 2. If the division invests in the equipment, its ROI will likely decrease to

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 1CE: Forchen, Inc., provided the following information for two of its divisions for last year: Required:...

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