The Augment Manufacturing Company Has Three Divisions: X Division, Y

question 142

Essay

The Augment Manufacturing Company has three divisions: X Division, Y Division, and Z Division. Operating results for the three divisions for last year were as follows:
$\begin{array}{c}\begin{array}{lrr} \text { Residual income } &\\ \text { Net operating income } &\\ \text {Average operating asset: } &\\ \text { Sales } &\\ \text { Profit margin } &\\\end{array}\begin{array}{ccc}\text { Division } \mathrm{X} & \text { Division Y } & \text { Division Z } \\\$ 98,400& \$27,200 &\$ 12,000 \\188,600 & 115,600& 76,000 \\ 820,000 & 680,000 & 400,000 \\ 1,640,000 & 1,445,000 & 1,040,000 \\ 11.5 \% & 8.0 \% & 5 .0\% \\\end{array}\end{array}$

Required:
a. What is the ROI for each of the three divisions?
b. What is the cost of capital for each of the three divisions?

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Definitions:

Orbicularis Oris

A muscle around the mouth that allows the lips to close or pucker.

Puckers Mouth

The action of contracting the muscles around the mouth, often resulting in a wrinkled or protruded appearance.

Trapezius Muscle

A large superficial muscle that extends from the occipital bone to the lower thoracic vertebrae and to the scapula, involved in moving, rotating, and stabilizing the scapula and extending the neck.

Laterally Flex

To bend the body or a part of the body to the side.