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 Osa Sales Net operating income Average operating assets okohama $10,500,000 $ 35,000,000 $ 630,000 S 2,800,000 3,500,000 $17,500,000 Required 1. For each division, compute the return on investment (ROI) 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 Type here to search

Explanation / Answer

Margin = net operating income/sales Turnover = sales/average operating assets ROI           = margin * Turnover 1) Osaka margin = 630,000/10,500,000 6% turnover = 10,500,000/3,500,000 3 ROI        = 18% answer Yokohama Margin = 2,800,000/35,000,000 8% turnover = 35,000,000/17,500,000 2 ROI= 16% answer 2) Osaka Yokohama Average operating assets 3,500,000 17,500,000 Net operating income 630,000 2,800,000 Minimum required return on average assets 525000 2625000 Residual income 105,000 175,000 3) No

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---