Question

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: points Sales Net operating income Average operating assets Division Osaka Yokohama $ 10,200,000 $ 32,000,000 $ 816,000 $ 3,200,000 $ 2,550,000 $ 16,000,000 eBook 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? Ask Complete this question by entering your answers in the tabs below. Print Required 1 Required 2 Required 3 For each division, compute the return on investment (ROI) in terms of margin and turnover. References Osaka Yokohama ROI % < Required 1 Required 2 >

Answer 1

	Osaka	Yokohoma
ROI	= (816,000/2,550,000) = 32%	= (3,200,000/16,000,000) = 20%

.

	Osaka	Yokohoma
Residual income	= 816,000-(2,550,000*17%) = 382,500	= (3,200,000 - (16,000,000*17%) = 480,000

.

Yes