Three divisions of Jameson Co. report the following sales and operating data: Fo

Question

Three divisions of Jameson Co. report the following sales and operating data:

For question3-a and 3-b please write reject or accept

For question3-a and 3-b please write reject or accept

Three divisions of Jameson Co. report the following sales and operating data: Fitness Training Athletic Wear Saal Average operating assets Operating income Minimum required rate of returrn Spa Services $ 550,000$800,000 $ 700,000 $ 110,000$ 160,000 $ 140,000 $ 11,000 $ 6,000 21,000 5% 8% 5% Required: 1. Compute the ROl for each division, using the formula stated in terms of margin and turnover ROI Fitness training Spa services Athletic wear 2. Compute the residual income for each division. Fitness Training Spa Services Athletic Wear Residual income

Explanation / Answer

Question 1). Solution :- Return on investment = Net profit margin * Total asset turnover.

Fitness training division = (11000 / 550000) * (550000 / 110000)

= 0.02 * 5

= 0.10 i.e., 10 %

Spa services = (16000 / 800000) * (800000 / 160000)

= 0.02 * 5

= 0.10 i.e., 10 %

Athletic wear = (21000 / 700000) * (700000 / 140000)

= 0.03 * 5

= 0.15 i.e., 15 %

Conclusion :-

Question 2). Solution :- Residual income = Actual operating income - Required operating income.

Question 3). a). Answer :-

Question 3). b). Answer :-

Particulars Return on investment (ROI) Fitness training division 10 % Spa services 10 % Athletic wear 15 %

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