Question

Gem Industries is a division of a major corporation. Last year the division had total sales of $23,822,500, net operating income of $2,715,765, and average operating assets of $9,529,000. The company's minimum required rate of return is 18%.Required:a. What is the division's margin? (Round your percentage answer to 2 decimal places.)b. What is the division's turnover? (Round your answer to 2 decimal places.)c. What is the division's return on investment (ROI)? (Round percentage your answer to 2 decimal places.)

Answer 1

a. Division's Margin = 11.4%

b. Division's Turnover = $23,822,500

c. Return on Investment = 28.5%

Step-by-step explanation:

Provided information,

Total sales = Turnover = $23,822,500

Net operating income = $2,715,765

Average Operating assets = $9,529,000

Required rate of return = 18%

a. Division's Margin = Net operating income/Total sales
`*` 100

= $2,715,765/$23,822,500
`*` 100 = 11.4%

b. Division's Turnover = Division's Sales = $23,822,500

c. Return on Investment = Net Operating Income/ Average Operating Assets [tex]\times[/tex} 100 = $2,715,765/$9,529,000 [tex]\times[/tex} 100 = 28.5%