Benchmark Clothing sells a broad line of clothing goods to specialty
retail and department stores. For 2001, the company’s South American Division had the following performance targets:
|
Asset turnover |
1.8 |
|
Profit margin |
8% |
Actual information concerning the performance of the South American Division in 2001 follows:
|
Total assets at beginning of year |
$4,700,000 |
|
Total assets at end of year |
7,300,000 |
|
Sales |
12,000,000 |
|
Operating expenses |
11,280,000 |
a. For 2001, did the South American Division achieve its target objectives for ROI, asset turnover, and profit margin?
b. Where, as indicated by the performance measures, are the most likely areas to improve performance?
c. If the company has an overall target return of 13 percent, what was the South American Division’s residual income for 2001?