ROI for the Manufacturing Plants
Continuing the company's ROI strategy, each manufacturing plant within the three product divisions had an annual ROI target to meet. Each product division's OEM sales were traced to the plants that made the parts. The plants maintained finished goods inventories and shipped parts directly to OEM customers. A plant's ROI target was based on budgeted profit (including allocations of division and corporate overhead expenses and an imputed income tax expense) devided by actual beginning-of-the-year net assets (defined as total assets less current liabilities). Exhibit 2 contains an example of the rochester plant's actual 1992 ROI computation. Actual ROI was actual profit divided by actual beginning-of-the-year net assets