Assume that the company evaluates performance using, Accounting Basics

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Assume that the company evaluates performance using

Rains Nickless Ltd. of Australia has two divisions that operate in Perth and Darwin. Selected data on the two divisions follow:

	Division
	Perth		Darwin
Sales	$	7,560,000	$	26,750,000
Net operating income	$	498,960	$	1,952,750
Average operating assets	$	2,700,000	$	10,700,000

Required:

1. Compute the return on investment (ROI) for each division. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Perth	Darwin
ROI	%	%

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.

Perth	Darwin
Residual income	$	$

3. Is the Darwin Division’s greater residual income an indication that it is better managed?

Yes/No

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Accounting Basics: Assume that the company evaluates performance using

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