Required information Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Megamart provides the following information on its two investment centers. Income $ 2,916,000 2,074,000 Average Assets $ 16,200,000 12,200,000 Investment Center Electronics Sporting goods Sales. $ 40,500,000 20,740,000 Exercise 9-10 (Algo) Computing return on investment and residual income; investing decision LO A1 1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? 2. Assume a target income of 11% of average assets. Compute residual income for each center. Which center generated the most residual income? 3. Assume the Electronics center is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? The target return is 11%.
Required information Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Megamart provides the following information on its two investment centers. Income $ 2,916,000 2,074,000 Average Assets $ 16,200,000 12,200,000 Investment Center Electronics Sporting goods Sales. $ 40,500,000 20,740,000 Exercise 9-10 (Algo) Computing return on investment and residual income; investing decision LO A1 1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? 2. Assume a target income of 11% of average assets. Compute residual income for each center. Which center generated the most residual income? 3. Assume the Electronics center is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? The target return is 11%.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
Problem 31E: Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions:...
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