Orange Corporation has two divisions: Fruit and Flower. The following information for the past year is available for each division: Flower Division Fruit Division Sales revenue Cost of goods sold and operating expenses Net operating income Average invested assets $ 1,320,000 $1,980,000 990,000 $330,000 1,485,000 $495,000 $ 5,000,000 $1,980,000 Orange has established a hurdle rate of 5 percent. Required: 1-a. Compute each division's return on Investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $142,000. The total Investment required is $2,100,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made.. 3. Determine whether both managers will support the Investment.

Orange Corporation has two divisions: Fruit and Flower. The following information for the past year is available for each division: Flower Division Fruit Division Sales revenue Cost of goods sold and operating expenses Net operating income Average invested assets $ 1,320,000 $1,980,000 990,000 $330,000 1,485,000 $495,000 $ 5,000,000 $1,980,000 Orange has established a hurdle rate of 5 percent. Required: 1-a. Compute each division's return on Investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $142,000. The total Investment required is $2,100,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made.. 3. Determine whether both managers will support the Investment.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 11E: Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant,...

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