Check my work 4 Meiji Isetan Corp. of Japan has two regional divisions with head
ID: 2523236 • Letter: C
Question
Check my work 4 Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow Division points Osaka Yokohama 10,900,000 39,000,000 $ 763,000 3,510,000 Average operating assets 2,725,000 19,500,000 Sales Net operating income eBook Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Hint Print Complete this question by entering your answers in the tabs below Required1Required 2 Required 3 For each division, compute the return on investment (ROI) in terms of margin and turnover Osaka ROIExplanation / Answer
Yes.As Residual income shows better management of Yokohama division.This clearly shows that assessing the performance of the investment center with residual income (RI) is a better option since it provides a better analysis, and it is better for managers of the investment center to adopt Residual income when gauging a potential project since it increases the profitability of their division.
Particulars osaka Yokohama a)Net operating income 763000 3510000 b)Average invested assets 2725000 19500000 c) ROI=a/b×100 28% 46% d) Minimum required rate 16% 16% e)Normal return=.16×avg.asset invested 436000 3120000 f) Residual income=operating income -normal income 327000 390000