Rains nickless ltd of australia has two divisions that, Ask an Expert

Accounting

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, Accounting

Category:- Accounting Basics
Reference No.:- M91749515

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