Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osak

Question

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Yokohama $10,800,000 $ 38,000,000 $ 648,000 $ 3,040,000 S 3,600,000 $ 19,000,000 Osaka Sales Net operating income Average operating assets Required: 1. For each division, compute the return on investment (ROl) in terms of margin and turnover. Osaka Yokohama ROI 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 Net operating income Minimum required return on average assets Residual income 3. Is Yokohama's greater amount of residual income an indication that it is better managed? O Yes O No

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Osaka Yokohama Sales         10,800,000.00 38,000,000.00 Net operating Income               648,000.00      3,040,000.00 Average operating assets           3,600,000.00 19,000,000.00 Margin = NOI/Sales 6.00% 8.00% Turnover= Sales/Avg operating assets                            3.00                      2.00 Return on investment = Margin * turnover 18.00% 16.00% 2) Average operating assets           3,600,000.00 19,000,000.00 Net operating Income               648,000.00      3,040,000.00 Minimum required return on Average assets = Avg Op Assets*15%               540,000.00      2,850,000.00 Residual Income = NOI - Minimum Required return               108,000.00         190,000.00 3) No since in terms of % i.e. ROI Osaka is better managed

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