Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osak
ID: 2525758 • 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 Yokohama Sales $ 9,100,000 $ 21,000,000 Net operating income $ 455,000 $ 1,470,000 Average operating assets $ 2,275,000 $ 10,500,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. (Do not round intermediate calculations).2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 12%. Compute the residual income for each division.
Explanation / Answer
Osaka: Margin 5.00% =455000/9100000 Turnover 4 =9100000/2275000 ROI 20.00% =5%*4 Yokohama: Margin 7.00% =1470000/21000000 Turnover 2.00 =21000000/10500000 ROI 14.00% =7%*2 2 Residual income Osaka 182000 =455000-(2275000*12%) Yokohama 210000 =1470000-(10500000*12%)