Question

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Sales Net operating income Average operating assets Division Osaka Yokohama 10,200,000 $ 32,888,eee 816,00 $ 3.2ee,eee 2,55e,eee $ 16.000. $ $ Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 17% Compute the residual income for each division 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Complete this question by entering your answers in the tabs below. Required: Required 2 Required 3 For each division compute the retum on investment (ROI) in terms of margin and tumover Osaka Required 2 >

Answer 1

Osaka Yokohama sales 11,02,00,000 32000000 net operating income 816000 3200000 average operating assets 2550000 16000000 min required rate of return 17% 17% 1. answer Osaka Yokohama margin = net operating income/sales*100 10% turnover =sales/average operating assets ROI= margin *turnover 32% 20% 2) answer Osaka Yokohama residual income(loss)=operating income-(avg operating assets*min rate of return) 382500 480000 3) answer yes yokohoma is greater amount of residual income an indication that better managed