Meiji Isetan Corp. of Japan has two regional divisions withheadquarters in Osaka and Yokohama....

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Accounting

Meiji Isetan Corp. of Japan has two regional divisions withheadquarters in Osaka and Yokohama. Selected data on the twodivisions follow: Division Osaka Yokohama Sales $ 9,800,000 $28,000,000 Net operating income $ 588,000 $ 2,240,000 Averageoperating assets $ 2,450,000 $ 14,000,000 Required: 1. For eachdivision, compute the return on investment (ROI) in terms of marginand turnover. 2. Assume that the company evaluates performanceusing residual income and that the minimum required rate of returnfor any division is 14%. Compute the residual income for eachdivision. 3. Is Yokohama’s greater amount of residual income anindication that it is better managed?
For each division, compute the return on investment (ROI) interms of margin and turnover.
Osaka Yokohama
ROI % %
Assume that the company evaluates performance using residualincome and that the minimum required rate of return for anydivision is 14%. Compute the residual income for each division.
Osaka Yokohama
Residual income
Is Yokohama’s greater amount of residual income an indicationthat it is better managed?
Yes
No

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4.2 Ratings (493 Votes)

Answer1Return on Investment Net operating incomeSalesSalesAverage operating assets Osaka Division 588000980000098000002450000 64 24 Yokohama Division224000028000000 See Answer

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In: AccountingMeiji Isetan Corp. of Japan has two regional divisions withheadquarters in Osaka and Yokohama. Selected...Meiji Isetan Corp. of Japan has two regional divisions withheadquarters in Osaka and Yokohama. Selected data on the twodivisions follow: Division Osaka Yokohama Sales $ 9,800,000 $28,000,000 Net operating income $ 588,000 $ 2,240,000 Averageoperating assets $ 2,450,000 $ 14,000,000 Required: 1. For eachdivision, compute the return on investment (ROI) in terms of marginand turnover. 2. Assume that the company evaluates performanceusing residual income and that the minimum required rate of returnfor any division is 14%. Compute the residual income for eachdivision. 3. Is Yokohama’s greater amount of residual income anindication that it is better managed?For each division, compute the return on investment (ROI) interms of margin and turnover.OsakaYokohamaROI %%Assume that the company evaluates performance using residualincome and that the minimum required rate of return for anydivision is 14%. Compute the residual income for each division.OsakaYokohamaResidual incomeIs Yokohama’s greater amount of residual income an indicationthat it is better managed?YesNo