The Woods and Water Company has two operating divisions, the Service Division and the Irrigation Division. The company evaluates the performance of its division using the return on investment (ROI) measure. The following information pertains to the two divisions as of the end of the current year.
See attachment for table.
During the year, the Service Division repaired 8,000 units at an average service fee of $50.00 per unit. The Irrigation Division sold 250 units at an average price of $5,000. The company requires a minimum rate of return of 12%.
Compute the Return on Investment (ROI) measure for both divisions an the company as a whole. Based on ROI alone which division had the better performance? Round ROI measures to the nearest whole percent. Evaluate this company.
Revenue Service division = 8000*50=400,000
Profits for the service division = 400,000-280,000 = 120,000
ROI for service ...
This solution calculates the revenue, profits, and return on investments (ROI) for the Service Division and Irrigation Division. It also analyses the data and concludes which division is doing better than the other.