Question

Romano Corporation has three operating divisions and requires a 11% return on all investments. Selected information is presented here: Required: Calculate the missing amounts for each division. (Do not round intermediate calculations. Round "Margin", "Turnover" and "ROI" to 2 decimal places.)

	Division X Division Y Division Z Revenues $1,007,000 Operating income $123,500 $77,500 Operating assets $492,000 $391,000 $377,091 Margin 12.26 % 13.00 % % Turnover 2.05 turn(s) 2.00 turn(s) 1.00 turn(s) ROI 25.10 % 26.00 % % Residual income $69,380 $36,020

Answer 1

Below is complete table , please refer computation in working notes

	Division X	Division Y	Division Z
Revenues	$1,007,000	$782,000	$377,091
Operating income	$123,500	$101,660.00	$77,500
Operating Assets	$492,000	$391,000	$377,091
Margin	12.26%	13.00%	20.55%
Turnover	2.05	2.00	1.00
ROI	25.10%	26.00%	20.55%
Residual Income	$69,380	$33,210	$36,020

Working Notes : -

Here the missing items are

I) Division Y- revenues and operating income and residual income

Computation of revenues for Division Y

Turnover = Revenues/Operating Assets

Hence, Revenues/$391,000=2

Hence , Revenues = $391,000 x 2 = $782,000

Computation of residual income of Division Y

Here we have keep return of all investment is 11%

Total Investment = Operating assets Division X + Operating Assets Division Y + Operating Assets Division Z

=$492,000+$391,000+$377,091=$1,260,091

Return require 11 % hence total Residual income on all investment for all division = $1,260,091 x 11%

=$138,610

Hence , Residual Income of Division Y = ($138,610-$69,380-$36,020)=$33,210

ii) Missing are Revenues ,Margin, ROI,

Similar way of Division Y we will calculate the revenues

Revenues/operating assets =1

Hence , Revenues =$377,091 x 1 =$377,091

Margin = Operating income/revenues = $77,500/$377,091=20.55%

ROI = Operating income/operating assets = $77,500/$377,091=20.55%