Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C $ 16, 200,000 $ 3,240,000 24 $ 28,960,000 %24 $ 26, 200,00e $ 5,240,00e Sales Average operating assets Net operating income Minimum required rate of return 761,400 7.ee% 7,240,000 463,360 7.50% 655,000 12.50% Requlred: 1. Compute the margin, turnover, and return on Investment (ROI) for each division. 2. Compute the residual Income (loss) for each division. 3. Assume that each division is presented with an Investment opportunity that would yleld a 8% rate of return. a. If performance Is belng measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is belng measured by residual income, which division or divisions will probably accept the opportunity?

Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C $ 16, 200,000 $ 3,240,000 24 $ 28,960,000 %24 $ 26, 200,00e $ 5,240,00e Sales Average operating assets Net operating income Minimum required rate of return 761,400 7.ee% 7,240,000 463,360 7.50% 655,000 12.50% Requlred: 1. Compute the margin, turnover, and return on Investment (ROI) for each division. 2. Compute the residual Income (loss) for each division. 3. Assume that each division is presented with an Investment opportunity that would yleld a 8% rate of return. a. If performance Is belng measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is belng measured by residual income, which division or divisions will probably accept the opportunity?

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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