Selected sales and operating data for three divisions of different structural engineering firms are given as follows:

	Division A			Division B			Division C
Sales	$	12,840,000		$	28,840,000		$	26,050,000
Average operating assets	$	3,210,000		$	7,210,000		$	5,210,000
Net operating income	$	564,960		$	346,080		$	755,450
Minimum required rate of return		6.00	%		6.50	%		14.50	%

Required:

1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.

2. Compute the residual income (loss) for each division.

3. Assume that each division is presented with an investment opportunity that would yield a 7% rate of return.

a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?

b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?

Req 1

Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Margin Turnover ROI Division A % % Division B % % Division C % %

Req 2

Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.)

	Division A Division B Division C Residual income (loss)

Req 3A

Assume that each division is presented with an investment opportunity that would yield a 7% rate of return. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?

	Division A Division B Division C

Req 3B

Assume that each division is presented with an investment opportunity that would yield a 7% rate of return. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?

	Division A Division B Division C