Question

Kelfour Enterprises has divided its operations into two divisions. Relevant accounting data for each division is as follows: Divisions Sales Operating Assets Operating Income Western Division $ 150,000 $ 100,000 $ 15,000 Eastern Division $ 300,000 $ 150,000 $ 16,500 Kelfour has an additional $50,000 of funds to invest. The manager of the Western Division believes that she can invest the funds at a rate of return (ROI) of 14% while the manager of the Eastern Division has found a new investment opportunity that is expected to yield a 12% ROI. Currently Kelfour uses ROI as the sole measure of managerial performance. Based on this informationa. The manager of the Western Division would accept the $50,000 additional investment opportunity because it would increase the Division's RI by $2,000.
b. The manager of the Eastern Division would accept the $50,000 additional investment opportunity because it would increase the Division's RI by $2,000.
c. The CEO would be indifferent because the $50,000 additional investment would increase the RI of the company as a whole regardless of which Division receives the additional investment.
d. All of the answers represent true statements.

Answer 1

Answer:

Option D is Correct.

All of the above statements are true.

Explanation:

The supervisor of the Western division is probably going to dismiss an idea to have the assets contributed her area of expertise - > in light of the fact that their current ROI is MORE than her ROI when contributing the assets  

The chief of the Eastern division is probably going to acknowledge an idea to have the assets contributed his specialization. Since their current ROI is LESS than her ROI when contributing the assets.

The CEO of Kelfour is probably going to support having the assets put resources into the Western Division. Since their current ROI is MORE express gratitude toward East's current ROI.