Investment center analysis; ROI and residual income Milano Corporation has three operating divisions and requires a 12% return on all investments. Selected information is presented here:
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Division A
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Division B
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Division C
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Revenues
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$500,000
|
?
|
?
|
|
Operating income
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$60,000
|
?
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$80,000
|
|
Operating assets
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$250,000
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$600,000
|
?
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Margin
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?
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12%
|
?
|
|
Turnover
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?
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1 turn
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2 turns
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|
ROI
|
?
|
?
|
?
|
|
Residual income
|
?
|
?
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$20,000
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Required:
a. Calculate the missing amounts for each division.
b. Comment on the relative performance of each division.
c. Provide an example to show how residual income improves decision making at the divisional level.