Question

Arco company has two divisions - mixers and food processors. arco company segmented income statements for the current fiscal year ended december 31 mixer food processor division division sales $2,500,000 $1,350,000 cost of goods sold 1,050,000 665,000 gross margin 1,450,000 685,000 allocated overhead 235,000 185,000 selling and administrative expenses 195,000 90,000 operating income 1,020,000 410,000 income tax expense (45%) 459,000 184,500 net income $ 561,000 $ 225,500 assume the mixer division has average operating assets totaling $6,000,000 for the year. what is the division's return on investment (to the nearest hundredth of a percent)?

Answer 1

With net income after tax of $561,000.00 for mixer division at the year-end December 31, the return of investment based on the division's average operating asset totaling to $6,000,000.00 is (9.35%) or to round it off, (9%). A negative result, meaning we need more sales and less expense for the next year.