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Ferris Ltd. of Australia has two divisions, one in Perth and one in Darwin. Selected...

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Accounting

Ferris Ltd. of Australia has two divisions, one in Perth and one in Darwin. Selected data on the two divisions follow:

Division
Perth Darwin
Sales $ 9,000,000 $ 20,000,000
Operating income 630,000 1,800,000
Average operating assets 3,000,000 10,000,000

Required: 1. Compute the ROI for each division.

2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division.

3. Is the Darwin Divisions greater residual income an indication that it is better managed?

multiple choice

Yes

Noimageimage

Required: 1. Compute the ROI for each division. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division. 3. Is the Darwin Division's greater residual income an indication that it is better managed? Yes No

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