Property-plant and equipment turnover ratio

Reference no: EM131030790

A machine that produces hockey pucks costs $20,500 and produces 10 pucks per hour. Two similar companies purchase the machine and begin producing and selling pucks. The first company, Northern Sales is located in International Falls, Minnesota. The second company, Southern Sales is located in Huntsville, Alabama. Northern Sales operates the machine 20 hours per day to meet customer demand. Southern sales operates the machine 10 hours per day to meet customer demand. Sales data for the first month of operations are:

	Northern	Southern
Property, plant, and equipment	$20,500	$20,500
Accumulated depreciation-Property, plant, and equipment	$500	$500
Pucks sold	6,000 pucks	3,000 pucks
Sales	$12,000	$6,000

Requirement:

Calculate the property, plant, and equipment turnover ratio (sales divided by average PPE) for both Northern Sales and Southern Sales. Explain how this ratio impacts the return on net operating assets of each company (assume the profit margin for each company is the same and that there has been no change in PPE).

Reference no: EM131030790

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