1)For each division, compute the return on sales, the capital turnover, and the return on investment (ROI)
2)Which division is the best performer if evaluation is based on ROI? Explain.
3)Suppose each division is assessed a cost of capital of 10% on invested capital. Compute the economic profit for each division. Which division is the best performer based on economic profit? Explain.
See spreadsheet for schedules illustrating how to analyze the ROI (ROA) and economic profit (residual income) for these three divisions.
1)For each division, compute the return on sales, the capital turnover, ...
Computations illustrated with instructional notes.
9-A1, 9-A2, and 10-A1: Purchasing agent, responsibility accounting, ROI and profit
9-A1, 9-A2, and 10-A1 attached.
Responsibility of a Purchasing Agent
Contribution Approach to Responsibility Accounting
ROI and Economic Profit Calculations