Question

Exercise 12-5 The top exhibit is the solution and the bottom is what the exercise started out with. Figure out how they got to the solution! You need to show which mission item they did before they worked on the rest!

Solution	Division
	Alpha		Bravo			Charlie
Sales................................	$4,000,000		$11,500,000	*		$3,000,000
Net operating income.........	$160,000		$920,000	*		$210,000	*
Average operating assets....	$800,000	*	$4,600,000			$1,500,000
Margin..............................	4%*		8%			7%*
Turnover...........................	5*		2.5			2
Return on investment (ROI).	20%		20%*			14%*

Note that Divisions Alpha and Bravo apparently have different strategies to obtain the same 20% return. Division Alpha has a low margin and a high turnover, whereas Division Bravo has just the opposite.

*Given.

	Division
	Alpha		Bravo			Charlie
Sales................................	$?		$11,500,000	*		$?
Net operating income.........	$?		$920,000	*		$210,000
Average operating assets....	$800,000	*	$?			$?
Margin..............................	4%*		8%			7%*
Turnover...........................	5*		?			?
Return on investment (ROI).	?		20%*			14%*

Answer 1

	Given that -
	Bravo
A	Return on investment = 20% = Net operating income / average operating asset = 20%
	average opearting asset =	=920000/20%		4,600,000
B	Asset turnover =	Total sales/ asset		=11,500,000/4,600,000
				2.5
	Alpha
A	Asset turnover = 5 = Total sales/total asset
	Total sales = 5* total asset = 5*800,000			$      4,000,000
B	Net operating income =Margin*Total sales = 4,000,000*4%
				$         160,000
C	Return on investment = Net income/Total asset = 160,000/800,000
				20%
	Charlie
A	Sales = Net operating income/margin% = 210000/7%				$      3,000,000
B	Average operating asset = net operating income/ROI%
			=210000/14%		1500000
C	Turnover = sales/average operating asset =
			=3,000,000/1,500,000		2