Question

In: Accounting

Calculating Average Operating Assets, Margin, Turnover, Return on Investment (ROI) Forchen, Inc., provided the following information...

Calculating Average Operating Assets, Margin, Turnover, Return on Investment (ROI)

Forchen, Inc., provided the following information for two of its divisions for last year:

Small Appliances
Division
Cleaning Products
Division
Sales $34,670,000 $34,800,000
Operating income 2,773,600 1,392,000
Operating assets, January 1 6,394,000 5,600,000
Operating assets, December 31 7,474,000 6,000,000

Required:

1. For the Small Appliances Division, calculate:

a. Average operating assets $
b. Margin %
c. Turnover
d. Return on investment (ROI) %

2. For the Cleaning Products Division, calculate:

a. Average operating assets $
b. Margin %
c. Turnover
d. Return on investment (ROI) %

3. What if operating income for the Small Appliances Division was $2,080,200? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios. When required, round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35. Enter "0", where ever required.

Average operating assets Unaffected by %__
Margin Lower by %__
Turnover Unaffected by %__
Return on investment (ROI) Lower by %__

Solutions

Expert Solution

Revised
Small Appliances Cleaning Products Small Appliances
Division Division Division
Sales 34,670,000 34,800,000 34,670,000
Operating income 2,773,600 1,392,000 2,080,200
Operating assets, January 1 6,394,000 5,600,000 6,394,000
Operating assets, December 31 7,474,000 6,000,000 7,474,000
Answer Formula Used Equation
1 Average Opertaing Assets 6,934,000 (Opening Assets+Closing)/2 (6394000+7474000)/2
Margin 8.00% (Operating Income/Sales) (2773600/34670000)
Turnover 34,670,000 Sales
ROI 40.00% (Operating Income/Av Operating Assets) (2773600/6934000)
Answer Formula Used Equation
2 Average Opertaing Assets 5,800,000 (Opening Assets+Closing)/2 (5600000+6000000)/2
Margin 4.00% (Operating Income/Sales) (1392000/34800000)
Turnover 34,800,000 Sales
ROI 24.00% (Operating Income/Av Operating Assets) (1392000/5800000)
Answer Formula Used Equation
3 Average Opertaing Assets 6,934,000 (Opening Assets+Closing)/2 (6394000+7474000)/2
Margin 6.00% (Operating Income/Sales) (2080200/34670000)
Turnover 34,670,000 Sales
ROI 30.00% (Operating Income/Av Operating Assets) (2080200/6934000)

Average operating assets

Unaffected by 0%
Margin Lower by 2%
Turnover Unaffected by 0%
Return on investment (ROI) Lower by 10%

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