Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow Sales Net operating income Average operating assets Division Yokohama Osaka $ 9,900,000 $ 29,000,000 $2,900,000 $ 792,000 $ 2,475,000 $ 14,500,000 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 17%. 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 Sales Net operating income Average operating assets Division Yokohama Osaka $ 9,900,000 $ 29,000,000 $2,900,000 $ 792,000 $ 2,475,000 $ 14,500,000 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 17%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 16E: A multinational corporation has a number of divisions, two of which are the North American Division...
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