Question

1.         Pollux Company had the following income statement for last year: Sales $360,000 Less: Cost of goods...

1.         Pollux Company had the following income statement for last year:

Sales

$360,000

Less: Cost of goods sold

195,000

Gross margin

$165,000

Less: Selling & administrative expense

    78,600

Operating income

$ 86,400

​

Beginning assets were $565,000 and ending assets were $597,000.

(Carry computations out to three decimal places.)

A.

What are average operating assets?

B.

What is margin?

C.

What is turnover?

D.

What is ROI?
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Answer #1

Question A.

Average operating assets = (Opening Assets + Closing assets)/2

Average operating assets = (565,000+597,000)/2

Average operating assets = $581,000

Question B.

Margin is the percentage of profit to sales. Gross profit margin is the ratio of gross profit to sales. Operating profit margin is the ratio between operating income to sales.

Gross profit margin = (Gross profit/Sales)*100

Gross profit margin = (165,000/360,000)*100

Gross profit margin = 45.83%

Operating profit margin = Operating profit / Sales*100

Operaring profit margin = 86,400/360,000*100 = 24%

Question C.

Turnover means total revenue from sales or provision of service. In this example, turnover is $360,000.

Question D.

Return on investment (ROI) =Profit/Average investment

Return on investment (ROI) = 86,400/581,000

Return on investment (ROI) = 14.87%

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