Reference no: EM132344752
Question
Sales $924,000
Cost of goods sold 415,800
Gross profit $508,200
Administrative expenses 184,800
Income from operations $323,400
The manager of the Consumer Products Division is considering ways to increase the return on investment.
a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $2,310,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place.
Profit margin___- %
Investment turnover
Rate of return on investment___%
b. If expenses could be reduced by $46,200 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place.
Profit margin___ %
Investment turnover
Rate of return on investment ___%
The income from operations and the amount of invested assets in each division of Beck Industries are as follows:
Income from Operations Invested Assets
Retail Division $126,000 $700,000
Commercial Division 68,000 340,000
Internet Division 158,700 690,000
Assume that management has established a 8% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
Retail Division Commercial Division Internet Division
Income from operations $126,000 $68,000 $158,700
Minimum acceptable income from operations as a percent of invested assets
Residual income
b. Which division has the most residual income?