EXERCISE 12-5 Contrasting Return on Investment (ROI) and Residual Income [LO2, LO31 Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama Selected data on the two divisions follow (in millions of yen, denoted by ¥): Division Osaka Yokohama Sales. ¥3,000,000 ¥9,000,000 Net operating income Average operating assets. ¥210,000 ¥1,000,000 ¥720,000 ¥4,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. Where necessary, carry computations to two decimal places. 2. Assume that the company evaluates performance using residual income and that the mini- mum required rate of return for any division is 15%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Explain.

EXERCISE 12-5 Contrasting Return on Investment (ROI) and Residual Income [LO2, LO31 Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama Selected data on the two divisions follow (in millions of yen, denoted by ¥): Division Osaka Yokohama Sales. ¥3,000,000 ¥9,000,000 Net operating income Average operating assets. ¥210,000 ¥1,000,000 ¥720,000 ¥4,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. Where necessary, carry computations to two decimal places. 2. Assume that the company evaluates performance using residual income and that the mini- mum required rate of return for any division is 15%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Explain.

Financial & Managerial Accounting

14th Edition

ISBN:9781337119207

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter23: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 23.16EX: Determining missing items from computations Data for the North, South, East, and West divisions of...

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