Stevens Company Has Two Divisions That Report on a Decentralized

Stevens Company has two divisions that report on a decentralized basis.Their results for the current year were as follows:
$$\begin{array} { l c c } & \text { Halmet } & \text { Ball } \\\text { Sales } & \$ 150,000 & \$ 300,000 \\\text { Income } & \$ 15,000 & \$ 45,000 \\\text { Asset base } & \$ 7,000 & \$ 150,000 \\\text { Weighted average cost of capital }& 12 \% & 12 \%\end{array}$$ Compute the following amounts for each division:
a.Return on investment (ROI)if the desired rate of return is 12 percent.
b.Residual income if the desired rate of return is 20 percent.
c.EVA.
d.Turnover.
e.Margin for each division.

Correct Answer:

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a.Helmet Division: ROI = $15,000/$75,000...

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