est and results for its three divisions South w the The Maim

est, and results for its three divisions South, w the The Maim Cooration East rmported the foliowing operating East Division Division Division 380 000 S1,700.0007 $2,000,000 50,000$100,000 $200.0001 s825.000l s800,000! Which division has the smallest return on investment (ROI)? A South B West C. East D. All three divisions are the same

Solution

The correct answer is option : (B) i.e. West which is calculated as below:-

Return on investment (ROI) = (Operating Income/ Divisional Assets)

ROI of South = (20,000/200,000) = 10%

ROI of West = (50,000/625,000) = 8%

ROI of East = (100,000/800,000) = 12.5%

Hence, we can see from above calculation that ROI of West is smallest out of the three divisions.