In: Accounting
Required information
[The following information applies to the questions
displayed below.]
Megamart, a retailer of consumer goods, provides the following
information on two of its departments (each considered an
investment center).
Investment Center | Sales | Income |
Average Invested Assets |
||||||
Electronics | $ | 40,000,000 | $ | 2,880,000 | $ | 16,000,000 | |||
Sporting goods | 20,000,000 | 2,040,000 | 12,000,000 | ||||||
Compute profit margin and investment turnover for each
department. Which department generates the most net income per
dollar of sales? Which department is most efficient at generating
sales from average invested assets?
Working |
Electronics |
Sporting Goods |
|
A |
Income |
$ 2,880,000.00 |
$ 2,040,000.00 |
B |
Sales |
$ 40,000,000.00 |
$ 20,000,000.00 |
C = (A/B) x 100 |
Profit Margin |
7.20% |
10.20% |
Working |
Electronics |
Sporting Goods |
|
A |
Sales |
$ 40,000,000.00 |
$ 20,000,000.00 |
B |
Average Invested Assets |
$ 16,000,000.00 |
$ 12,000,000.00 |
C = (A/B) x 100 |
Investment Turnover |
2.5 times |
1.67 times |