Question - Milano Corporation has three operating divisions and requires a 12% return on all investments. Selected information is presented here:
Division A Division B Division C
Revenues . . . . . . . . . . . . . . . $500,000 ? ?
Operating income . . . . . . . . . $ 60,000 ? $80,000
Operating assets . . . . . . . . . . $250,000 $600,000 ?
Margin . . . . . . . . . . . . . . . . . . ? 1 2% ?
Turnover . . . . . . . . . . . . . . . . ? 1 turn 2 turns
ROI . . . . . . . . . . . . . . . . . . . . ? ? ?
Residual income . . . . . . . . . . ? ? $20,000
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.