Question

The sales, income from operations, and invested assets for each
division of Grosbeak Company are as

follows:

Sales

Income from

Operations

Invested

Assets

Division E $5,000,000 $550,000 $2,400,000

Division F 4,800,000 860,000 2,500,000

Division G 7,000,000 860,000 2,900,000

(a) Using the expanded expression, determine the profit margin,
investment turnover, and

rate of return on investment for each division. Round to one
decimal place.

(b) Which is (are) the most profitable per dollar invested?

ANS: (a)

a) Division

E

b) Division

F

c) Division

G

ANS: (b)

Answer #1

(a) Using the expanded expression, determine the profit margin,
investment turnover, and

rate of return on investment for each division.

Division E | Division F | Division G | |

Profit margin | 550000*100/5000000 = 11% | 860000*100/4800000 = 17.9% | 860000*100/7000000 = 12.3% |

Investment turnover | 5000000/2400000 = 2.1 | 4800000/2500000 = 1.9 | 7000000/2900000 = 2.4 |

Return on investment | 550000*100/2400000 = 22.9% | 860000*100/2500000 = 34.4% | 860000*100/2900000 = 29.7% |

(b) Which is (are)the most profitable per dollar invested

So answer is b) Division F

Return on Investment
The income from operations and the amount of invested assets in
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Income from Operations
Invested Assets
Retail Division
$80,000
$400,000
Commercial Division
171,600
780,000
Internet Division
55,500
370,000
a. Compute the return on investment for each
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Retail Division
%
Commercial Division
%
Internet Division
%
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Income from Operations
Invested Assets
Retail Division
$52,200
$290,000
Commercial Division
46,400
290,000
Internet Division
117,600
840,000
a. Compute the return on investment for each
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Percent
Retail Division
%
Commercial Division
%
Internet Division
%
b. Which division is the most profitable per
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Income from Operations
Invested Assets
Retail Division
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470,000
Commercial Division
53,200
280,000
Internet Division
126,000
700,000
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each division. (Round to the nearest whole number.)
Division
Percent
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Commercial Division
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Internet Division
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b. Which division is the most profitable per
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161,700
770,000
Internet Division
32,500
250,000
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Internet Division
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139,400
820,000
Internet Division
62,400
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Internet Division
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