The following is divisional information for EVQ Enterprises

East Division West Division
Operating income $250,000 $200,000
Net sales 2,225,000 1,575,000
Total assets at Jan. 1 1,500,000 840,000
Total assets at Dec .31 1,200,000 1,000,000

The target rate of return is 12% for the East Division and is 10% for the West Division.

Compute the return on investment for each division. (Round to one decimal place.)
What will be an ideal response

Average assets: (Beginning assets + Ending assets) / 2

East Division = ($1,500,000 + $1,200,000 ) / 2
= $2,700,000 / 2
= $1,350,000

West Division = ($840,000 + $1,000,000 ) / 2
= $1,840,000 / 2
= $920,000

Return on investment = Operating income / Average total assets

East Division = $250,000 / $1,350,000
= 18.5%

West Division = $200,000 / $920,000
= 21.7%

Business

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