Answer:
Division A is doing better and his more profitable because it has a higher ROI than Division B
Explanation:
Return on Investment is the proportion of operating assets that an investment center earned as as net operating income.
ROI is measure of the returned earned by a division relative to the amount invested in the assets used to generate the return.
It is calculated as follows
ROI = operating income/operating assets
Division A
Net operating income = Sales - expenses
Net operating income = 200,000 - 150,000 = 50,000
Operating assets = 950,000
ROI = 50,000/950,000× 100 = 5.26 %
Division B
Net operating income = 45,000 - 35,000 = 10,000
Operating assets = 200,000
ROI = 10,000/ 200,000 × 100 = 5 %
Division A is doing better and his more profitable because it has a higher ROI than Division B
