Presented below is selected information for three regional divisions of Medina Company:
Divisions:
North West South
Contribution margin 300300 500100 399300
Controllable margin 140000 360200 209000
Average operating assets 1000000 1566087 1492857
Minimum rate of return 0.11 0.15 0.09
Required:
1. Compute the return on investment for each division.
(Round ROI to 0 decimal places)
2. Compute the residual income for each division.
(Round final answers to 0 decimal places)
3. Assume that each division has an investment opportunity that would provide a rate of return of 16%.
a) If ROI is used to measure performance, which division or divisions will probably make the additional investment?
b) If residual income is used to measure performance, which division or divisions will probably make the additional investment?
