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pduvin pduvin
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6 years ago
National Can Company has three divisions, Eastern, Midwestern, and Western. Because of very different accounting methods and inflation rates in different countries it is considering multiple evaluation measures. Information gathered about the divisions for the year just ended follows:

   Assets    Income   
   Book value   Current value    Book value   Current value
Eastern   $600,000   $900,000    $120,000   $110,000
Midwestern   700,000    700,000   120,000    120,000
Western    1,000,000    1,400,000   200,000    180,000

The company is currently using a required rate of return of 15 percent.

Required:
a.   Compute the ROI using both book value and current value for all divisions. Round to three decimal places.
b.   Compute residual income using book value and current value for all divisions.
c.   Does book value or current value provide the better basis for performance evaluation? Why? Which division is the most successful?
Textbook 
Cost Accounting: A Managerial Emphasis, Canadian Edition

Cost Accounting: A Managerial Emphasis, Canadian Edition


Edition: 7th
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AllopaAllopa
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