Consolidated Supply Corporation uses the investment centre concept for the service stations that it manages in the city.Consolidated has a 15% required rate of return on investment in order for a branch station to be viable.Select operating data for three of its stations for 2017 are as follows:
$$\begin{array} { | l | r | r | r | }
\hline &{ \text { Pine Street } } & \text { Oak Street } & { \text { GumStreet } } \
\hline \text { Revenue } & \$ 8500000 & \$ 6750000 & \$ 7500000 \
\hline \text { Operating assets } & 3500000 & 3500000 & 2500000 \
\hline \text { Net operating profit } & 480000 & 575000 & 455000 \
\hline
\end{array}$$
Required:
a.Compute the return on investment for each station.
b.Which service station manager is doing best based only on ROI? Why?
c.Are any of the service stations in danger of being closed due to lack of performance?
d.What other factors should be included when evaluating the managers?

Question

Consolidated Supply Corporation uses the investment centre concept for the service stations that it manages in the city.Consolidated has a 15% required rate of return on investment in order for a branch station to be viable.Select operating data for three of its stations for 2017 are as follows:
 $$\begin{array} { | l | r | r | r | } 
\hline &{ \text { Pine Street } } & \text { Oak Street } &  { \text { GumStreet } } \
\hline \text { Revenue } & \$ 8500000 & \$ 6750000 & \$ 7500000 \
\hline \text { Operating assets } & 3500000 & 3500000 & 2500000 \
\hline \text { Net operating profit } & 480000 & 575000 & 455000 \
\hline
\end{array}$$ 
Required:
a.Compute the return on investment for each station.
b.Which service station manager is doing best based only on ROI? Why?
c.Are any of the service stations in danger of being closed due to lack of performance?
d.What other factors should be included when evaluating the managers?

Quizplus · Accepted Answer

The Answer of Consolidated Supply Corporation uses the investment centre concept for the service stations that it manages in the city.Consolidated has a 15% required rate of return on investment in order for a branch station to be viable.Select operating data for three of its stations for 2017 are as follows:
 $$\begin{array} { | l | r | r | r | } 
\hline &{ \text { Pine Street } } & \text { Oak Street } &  { \text { GumStreet } } \
\hline \text { Revenue } & \$ 8500000 & \$ 6750000 & \$ 7500000 \
\hline \text { Operating assets } & 3500000 & 3500000 & 2500000 \
\hline \text { Net operating profit } & 480000 & 575000 & 455000 \
\hline
\end{array}$$ 
Required:
a.Compute the return on investment for each station.
b.Which service station manager is doing best based only on ROI? Why?
c.Are any of the service stations in danger of being closed due to lack of performance?
d.What other factors should be included when evaluating the managers?

Consolidated Supply Corporation Uses the Investment Centre Concept for the Service