Computing and Interpreting Return on Investment (ROI) [LO2]
Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are givenbelow (the currency is the Australian dollar, denoted here as $):
Division
New South
Queensland Wales
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,000,000 $7,000,000
Average operating assets . . . . . . . . . . . . . . . . $2,000,000 $2,000,000
Net operating income . . . . . . . . . . . . . . . . . . . $360,000 $420,000
Property, plant, and equipment (net) . . . . . . . . $950,000 $800,000
Required:
1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover.
2. Which divisional manager seems to be doing the better job? Why?