Compute the return on investment for each of the subsidiary.

Question Four

b) i) Compute the return on investment for each of the subsidiary.

Return on Investment (ROI) is calculated as:

$$\text{ROI} = \frac{\text{Operating Income}}{\text{Average Total Assets}}$$

The problem states that the company does not allocate corporate headquarters' costs or interest on long-term debt to the subsidiaries. Therefore, the operating income for each subsidiary should be calculated before these unallocated costs.

From the table:

• Total Operating Income = £1,020,000
• Total Variable cost of H = $240,000 + 300,000 + 480,000 = £1,0