Selected sales and operating data for three divisions of different structural en

Question

Selected sales and operating data for three divisions of different structural engineering firms are given as follows Division B $7,200,000 $11,200,000 $10,300,000 $1,440,000 5,600,000 2,060,000 $ 453,600 S 1,153,600 S 365,650 Division A Division C Sales Average operating assets Net operating income Minimum required rate of return 26.00% 20.60% 23.00% Required 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round your answers to 2 decimal places.) Margin Turnover ROI Division A Division B Division C 31.50% 20.60 17.75% times times times

Explanation / Answer

1) Calculate following :

2) Calculate residual income :

3a) Basis of ROI :

Basis of Residual income

Margin Turnover ROI Division A 6.3% 5 31.5% Division B 10.3% 2 20.6% Division C 3.55% 5 17.75%

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