The ArtMart Company Has Three Divisions: X Division, Y Division

question 31

Essay

The ArtMart Company has three divisions: X Division, Y Division, and Z Division. Operating results for the three divisions for last year were as follows:
$\begin{array}{lr} & \text { Division X }& \text { Division Y }& \text { Division Z}\\\text { Residual income } & \$ 8,400 &\$27,200&\$2,000\\\text { Net operating income } & 188,600&115,600&52,000 \\\text { Average operating } & \\\text { assets } & 820,000 &680,000&400,000\\\text { Sales } & 1,640,000 &1,445,000&1,040,000\\\text { Profit margin } & 11.5 \%&8.0\%&5.0\%\end{array}$
Corporate headquarters is offering an investment opportunity to each of the divisions. The opportunity will yield an operating income of $35,000, based on an average operating investment of $246,000.
Required:
a. If the divisions are being evaluated using return on investment (ROI), what will be the decision (accept or reject) of each division regarding this opportunity? Support your answer with the appropriate calculations.
b. If the divisions are being evaluated using residual income, what will be the decision (accept or reject) of each division regarding this opportunity? Support your answer with the appropriate calculations.

---

Definitions:

Black And Mouton's

Refers to the managerial grid model developed by Robert Blake and Jane Mouton, which identifies five leadership styles based on the concern for people and concern for production.

Behavioral Approach

The Behavioral Approach to leadership focuses on the observable actions and behaviors of leaders, such as how they communicate, motivate, and interact with followers, rather than on their traits or innate qualities.

Emotional Intelligence

The skill to recognize, regulate, and articulate personal emotions, while also managing social interactions with care and understanding.

Motivational Speech

An inspirational address designed to encourage and stimulate an audience to pursue their goals or overcome challenges.