Follow instructions on screen Help Save & Exit Submit ACC 219 Chapter 11 3 Meji
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Question
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Help Save & Exit Submit ACC 219 Chapter 11 3 Meji Isetan Corp. of Japan has two regional follow divisions with headquarters in Osaka and Yokohama Selected data on the two divisions 10 Division Osaka 9,100,809 $21,ee0,900 Sales Net operating income $455,000 1,470,0ee Average operating assets 2,275,00 $1,500,900 n, compute the return on investment (ROI) in terms of margin and turnover 2. Assume that the company evaluates performance u division is 12% Compute the residual income for each division 3. Is Yokohama's greater amount of residual income an indication t ising residual income and that the minimum required rate of return for any Complete this question by entering your answers in the tabs belowExplanation / Answer
Solution:
1) Calculation of ROI
Osaka
Yokohama
Net Operating Income (a)
455000
$1,470,000
Average Operating Assets (b)
$2,275,000
$10,500,000
Return on Investment (ROI)
(a/b*100)
20
%
14
%
2) Calculation of Residual Income
Osaka
Yokohama
Average Operating Assets (a)
$2,275,000
$10,500,000
Required Rate of Return (b)
12%
12%
Minimum Required Income (a*b)
$273,000
$1,260,000
Net Operating Income (y)
$455,000
$1,470,000
Minimum Required Income (z)
$273,000
$1,260,000
Residual Income (y - z)
$182,000
$210,000
3) NO, greater residual income does not show that the Yokohama manager is better.
ROI is the best measure to evaluate the performance of managers.
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Osaka
Yokohama
Net Operating Income (a)
455000
$1,470,000
Average Operating Assets (b)
$2,275,000
$10,500,000
Return on Investment (ROI)
(a/b*100)
20
%
14
%