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Compute the return on investment

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Problem - Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:

Division Osaka Yokohama 

Sales $9,500,000    $25,000,000   

Net operating income $855,000    $2,750,000   

Average operating assets $2,375,000    $12,500,000 

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 18%. Compute the residual income for each division.      

3. Is Yokohama's greater amount of residual income an indication that it is better managed?

Reference no: EM131568967

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