Use the Following Information to Answer Question Hays Company Has Set a Target Return on Investment (ROI)

question 92

Essay

Use the following information to answer Question. Renfro Company has two divisions, the Restaurants Division and the Commissary Division. The following information was gathered for the two divisions in 2012: $$\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Restaurants } \\\text { Division }\end{array} & \begin{array} { l } \text { Commissary } \\\text { Division }\end{array} \\\hline \text { Operating Income } & \$ 4,000,000 & \$ 1,500,000 \\\hline \text { Operating Assets } & \$ 30,000,000 & \$ 10,500,000 \\\hline\end{array}$$
Hays Company has set a target return on investment (ROI) of 12% for both divisions.
Calculate residual income (RI) for the Restaurants Division and the Commissary Division. Based on RI, which division appears to have performed better?

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Definitions:

Tacos

A traditional Mexican dish consisting of a small hand-sized corn or wheat tortilla topped with a filling such as beef, pork, chicken, seafood, beans, vegetables, and cheese.

Burritos

A traditional Mexican dish consisting of a wheat flour tortilla wrapped or folded around a filling, which can include a variety of ingredients such as meat, beans, cheese, and vegetables.

Specialization

Concentration of production on a limited range of goods or services to increase efficiency and productivity, often leading to increased trade between economies.

Lemonade

A sweetened beverage made from lemon juice, water, and sugar, often served cold.