Management bonuses are based on roi and the company uses

Reference no: EM13586920

A. Which of the three investments would be the first choice of the Western division manager? Why?

B. Which investment(s) (if any) would Jordan's shareholders want the division manager to make? Why?

The following data pertain to the Western Division of Jordan Company:

Division total contribution margin	$500,000
Profit margin controllable by the divisional manager	200,000
Average asset investment	600,000

Management bonuses are based on ROI, and the company uses responsibility accounting concepts when evaluating performance. Western's division manager is contemplating the following three investments. He can invest up to $300,000. Jordan has a cost of capital (RRR) of 20%.

	No. 1	No. 2	No. 3
Cost	$160,000	$200,000	$300,000
Expected income	52,000	34,000	80,000

Reference no: EM13586920

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