Ferris Ltd. of Australia has two divisions, one in Perth and one in Darwin. Selected...
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Accounting
Ferris Ltd. of Australia has two divisions, one in Perth and one in Darwin. Selected data on the two divisions follow:
Division
Perth
Darwin
Sales
$
9,000,000
$
20,000,000
Operating income
630,000
1,800,000
Average operating assets
3,000,000
10,000,000
Required:1.Compute the ROI for each division.
2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division.
3. Is the Darwin Divisions greater residual income an indication that it is better managed?
multiple choice
Yes
No
Required: 1. Compute the ROI for each division. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division. 3. Is the Darwin Division's greater residual income an indication that it is better managed? Yes No
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