Trees Unlimited has one greenhouse located in each of CornerBrook, Grand Falls, and Conception Bay South. Operating results ofthe past year for each location are in the following table:
| Corner Brook | Grand Falls | Conception Bay South |
Sales | $300,000 | $400,000 | $450,000 |
Net Income | 60,000 | 64,000 | 45,000 |
Beginning operating assets | 200,000 | 100,000 | 80,000 |
Ending operating assets | 300,000 | 300,000 | 100,000 |
Required
a. Compute the margin, turnover and rate of return for eachlocation.
b. Trees Unlimited required rate of return is 30%. Compute theresidual income for each
location.
c. Trees Unlimited would like to expand the marketcoverage in each community by opening
retail store. The opportunity willrequire an investment in operating assets of $500,000. It isexpected sales will be $350,000 operating expenses of$180,000. Based on residual income which communitywould be interest in retail store opportunity? Which would beinterested if evaluated based on return on investment?
