Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 11,000,000 $ 40,000,000 Net operating income $ 880,000 $ 4,000,000 Average operating assets $ 2,750,000 $ 20,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 18%. Compute the residual income for each division. 3. Is Yokohama’s greater amount of residual income an indication that it is better managed?
Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 11,000,000 $ 40,000,000 Net operating income $ 880,000 $ 4,000,000 Average operating assets $ 2,750,000 $ 20,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 18%. Compute the residual income for each division. 3. Is Yokohama’s greater amount of residual income an indication that it is better managed?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 5PA: Divisional performance analysis and evaluation The vice president of operations of Recycling...
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Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:
Division | ||
---|---|---|
Osaka | Yokohama | |
Sales | $ 11,000,000 | $ 40,000,000 |
Net operating income | $ 880,000 | $ 4,000,000 |
Average operating assets | $ 2,750,000 | $ 20,000,000 |
Required:
1. For each division, compute the
2. Assume that the company evaluates performance using residual income and that the minimum required
3. Is Yokohama’s greater amount of residual income an indication that it is better managed?
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