Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osak
ID: 2525077 • Letter: M
Question
Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Sales Net operating income Average operating assets Yokohama $10,800,000 $38,000,000 $ 648,000 $ 3,040,000 $ 3,600,000 $19,000,000 Required 1. For each division, compute the return on investment (ROI) in terms of margin and turnover Osaka Yokohama ROI 201 % 40 % 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division Osaka Yokohama Average operating assets $ 3,600,000 $ 19,000,000 3,040,000 16 $ 647,982 $ 3,039,984 648,000 Net operating income Minimum required return on average assets Residual income 18Explanation / Answer
1. Margin= Net Operating Income / Sales *100
Osaka : $ 648,000 / $ 10800000*100
= 6%
Yokohama :
= $ 3040000 / $ 38000000*100
= 8%
2. Turnover =Sales / Average Operating Assets
Osaka : $ 10800000 / $ 3600000*100
= 3%
Yokohama :
= $ 38000000/ $ 19000000*100
=2%
ROI = Margin * Turnover
Osaka : 18%
Yokohama : 16%
Hence the correct answer is :
2.
The correct answer is :
Note :
Osaka Yokohama ROI 18% 16%