Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

تمرين 53

The manager of Wilson's Toy Division is evaluated on her division's return on investment and residual income. The company requires that all divisions generate a minimum return on invested assets of 10 percent. Consistent failure to achieve this minimum target is grounds for the dismissal of a division manager. The annual bonus paid to division managers is 1.5 percent of residual income in excess of $200,000. The Toy Division's operating margin for the year was $10 million, during which time its average invested capital was $75 million.
Instructions
a. Compute the Toy Division's return on investment and residual income.
b. Will the manager of the Toy Division receive a bonus for her performance? If so, how much will it be?
c. What are some advantages and disadvantages of using ROI as a performance measurement criterion?