65 an art distribution company has three divisions which operate autonomously their 4302650


65) An art distribution company has three divisions which operate autonomously. Their results for 2010 were as follows:




Contribution margin1,440,0001,700,0003,500,000

Operating income1,000,0001,750,0002,520,000

Investment base9,000,00010,000,00014,000,000


The company's desired rate of return is 20 percent.



a.Compute each division's ROI.

b.Compute each division's residual income.

c.Rank each division by both ROI and residual income.

d.Which division had the best performance in 2011? Why?

66) Museum Corporation uses the investment centre concept for the museums that it manages. Select operating data for three of its museums for 2011 are as follows:




Total assets150,000125,000175,000

Net operating income25,50028,00029,500



a.Compute the return on investment for each division.

b.Which museum manager is doing best based only on ROI? Why?

c.What other factors should be included when evaluating the managers?



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