ROI and Residual Income: Basic ComputationsWatkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow. Trucking DivisionSeafood DivisionConstruction DivisionSales$ 1,200,000$ 750,000$ 900,000Operating assets600,000250,000350,000Net operating income116,00066,00063,000 (a) Compute the return on investment for each division. (Round answers to three decimal places.)Trucking ROI =AnswerSeafood ROI =AnswerConstruction ROI =Answer (b) Compute the residual income for each division.Residual incomeTruckingSeafoodConstructionNet operating incomeAnswerAnswerAnswerMinimum levelAnswerAnswerAnswerResidual incomeAnswerAnswerAnswer

ROI stands for Return on Investment, which is a ratio used for computing the profitability of the…

Answered: Watkins Associated Industries is a…

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

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Problem 13E: The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as...

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ROI and Residual Income: Basic Computations

Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow.

	Trucking Division	Seafood Division	Construction Division
Sales	$ 1,200,000	$ 750,000	$ 900,000
Operating assets	600,000	250,000	350,000
Net operating income	116,000	66,000	63,000

(a) Compute the return on investment for each division. (Round answers to three decimal places.)

Trucking ROI =	Answer
Seafood ROI =	Answer
Construction ROI =	Answer

(b) Compute the residual income for each division.

Residual income	Trucking	Seafood	Construction
Net operating income	Answer	Answer	Answer
Minimum level	Answer	Answer	Answer
Residual income	Answer	Answer	Answer

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