Margin = Operating Income / Sales
Turnover = Sales / Average Operating Assets
Return on Investment (ROI) = Margin x Turnover
Part 1
Year 1
Year 2
Operating Income
*given
Sales
*given
Margin (Operating Income / Sales)
Sales
*given
Average Operating Assets
*given
Turnover (Sales / Average Operating Assets)
Part 2
Return on Investment (ROI) [Margin x Turnover]
Residual Income = Operating income - (Minimum rate of return x Average operating assets)
Part 1
Operating income
Minimum rate of return
Average operating assets
Residual income
Part 2
Was the ROI for the Tuxedo Division greater than, less than, or equal to 7 percent?
Part 1Who set the maximum transfer price?Who set the minimum transfer price?
