Mallory, Inc. has the following data available for two of its divisions for last year:
$$\begin{array} { l c r }
&& \text { Europearn } \
& \text { Asian Division } & \text {Division } \
\text { Sales } & \$ 460,000 & \$ 900,000 \
\text { Contribution Margin } & 184,000 & 470,000 \
\text { Operating income } & 92,000 & 90,000 \
\text { Average operating assets } & 368,000 & 750,000 \
\text { Weighted average cost of capital } & 14 \% & 14 \%
\end{array}$$
The tax rate for Mallory, Inc. is 18%.
Required:
(1) Compute the following for each division:
(a) Profit margin.
(b) Asset turnover.
(c) ROI.
(d) Residual income.
(e) EVA (assume there are no current liabilities).
(2) Briefly discuss which division appears most successful and why?

Question

Mallory, Inc. has the following data available for two of its divisions for last year:
 $$\begin{array} { l c r } 
&& \text { Europearn } \
& \text { Asian Division } & \text {Division }  \  
\text { Sales } & \$ 460,000 & \$ 900,000 \
\text { Contribution Margin } & 184,000 & 470,000 \
\text { Operating income } & 92,000 & 90,000 \
\text { Average operating assets } & 368,000 & 750,000 \
\text { Weighted average cost of capital } & 14 \% & 14 \%
\end{array}$$ 
The tax rate for Mallory, Inc. is 18%.
Required:
(1) Compute the following for each division:
(a) Profit margin.
(b) Asset turnover.
(c) ROI.
(d) Residual income.
(e) EVA (assume there are no current liabilities).
(2) Briefly discuss which division appears most successful and why?

Quizplus · Accepted Answer

The Answer of Mallory, Inc. has the following data available for two of its divisions for last year:
 $$\begin{array} { l c r } 
&& \text { Europearn } \
& \text { Asian Division } & \text {Division }  \  
\text { Sales } & \$ 460,000 & \$ 900,000 \
\text { Contribution Margin } & 184,000 & 470,000 \
\text { Operating income } & 92,000 & 90,000 \
\text { Average operating assets } & 368,000 & 750,000 \
\text { Weighted average cost of capital } & 14 \% & 14 \%
\end{array}$$ 
The tax rate for Mallory, Inc. is 18%.
Required:
(1) Compute the following for each division:
(a) Profit margin.
(b) Asset turnover.
(c) ROI.
(d) Residual income.
(e) EVA (assume there are no current liabilities).
(2) Briefly discuss which division appears most successful and why?

Mallory, Inc The Tax Rate for Mallory, Inc