Part-1: Structural Engineering Firm | |||
Margin | Turnover | ROI | |
Division A | 6.40% | 5 | 32.00% |
Division B | 10.40% | 2 | 20.80% |
Division C | 3.65% | 5 | 18.25% |
Formula for refrence
Margin = Net operating income/sales | |||
Turnover = sales/Average operating assets | |||
ROI = Margin * Turnover |
Part-2 | |||
Division A | Division B | Division B | |
Average operating assets (a) | 1,460,000 | 5,650,000 | 2,080,000 |
Required rate of return (b) | 27.00% | 20.80% | 24.00% |
Required operating income (c=axb) | 394200 | 1175200 | 499200 |
Actual operating income (d) | 467,200 | 1,175,200 | 379,600 |
residual income (loss) (d-c) | 73,000 | 0 | -119,600 |
Residual income = Net operating income -(average operating assets*minimum Required rate of return |
Part-3(a) | |
Division A | Accept |
Division B | Accept |
Division C | Reject |
Part-3(b) | |
Division A | Accept |
Division B | Accept |
Division C | Reject |
Selected sales and operating data for three divisions of different structural engineering firms are Division A...
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