Question

Profit Margin, Investment Turnover, and return on investment

The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges):

Sales | $1,848,000 |

Cost of goods sold | 831,600 |

Gross profit | $1,016,400 |

Administrative expenses | 646,800 |

Income from operations | $369,600 |

The manager of the Consumer Products Division is considering ways to increase the return on investment.

**a.**
Using the DuPont formula for return on investment, determine the
profit margin, investment turnover, and return on investment of the
Consumer Products Division, assuming that $3,080,000 of assets have
been invested in the Consumer Products Division. Round the
investment turnover to one decimal place.

Profit margin _____%

Investment turnover _____

Rate of return on investment _____%

**b.** If
expenses could be reduced by $92,400 without decreasing sales, what
would be the impact on the profit margin, investment turnover, and
return on investment for the Consumer Products Division? Round the
investment turnover to one decimal place.

Profit margin _____%

Investment turnover _____

Rate of return on investment _____%

Answer #1

Profit Margin, Investment Turnover, and return on investment
The condensed income statement for the Consumer Products
Division of Fargo Industries Inc. is as follows (assuming no
service department charges):
Sales
$1,144,000
Cost of goods sold
514,800
Gross profit
$629,200
Administrative expenses
400,400
Income from operations
$228,800
The manager of the Consumer Products Division is considering
ways to increase the return on investment.
a. Using the DuPont formula for return on
investment, determine the profit margin, investment turnover, and
return on...

Profit Margin, Investment Turnover, and return on investment
The condensed income statement for the Consumer Products
Division of Fargo Industries Inc. is as follows (assuming no
service department charges):
Sales
$944,000
Cost of goods sold
424,800
Gross profit
$519,200
Administrative expenses
188,800
Income from operations
$330,400
The manager of the Consumer Products Division is considering
ways to increase the return on investment.
a. Using the DuPont formula for return on
investment, determine the profit margin, investment turnover, and
return on...

Profit Margin, Investment Turnover, and return on investment
The condensed income statement for the Consumer Products
Division of Fargo Industries Inc. is as follows (assuming no
service department charges):
Sales
$1,020,000
Cost of goods sold
459,000
Gross profit
$561,000
Administrative expenses
204,000
Income from operations
$357,000
The manager of the Consumer Products Division is considering
ways to increase the return on investment.
a. Using the DuPont formula for return on
investment, determine the profit margin, investment turnover, and
return on...

Profit Margin, Investment Turnover, and
Return on Investment
The condensed income statement for the Consumer Products Division
of Tri-State Industries Inc. is as follows (assuming no support
department allocations):
Sales
$798,000
Cost of goods sold
(359,100)
Gross profit
$438,900
Administrative expenses
(239,400)
Operating income
$199,500
The manager of the Consumer Products Division is considering ways
to increase the return on investment.
a. Using the DuPont formula for
return on investment, determine the profit margin, investment
turnover, and return on investment...

The condensed income statement for the Consumer Products
Division of Fargo Industries Inc. is as follows (assuming no
service department charges):
Sales
$942,000
Cost of goods sold
423,900
Gross profit
$518,100
Administrative expenses
188,400
Income from operations
$329,700
The manager of the Consumer Products Division is considering
ways to increase the return on investment.
a. Using the DuPont formula for return on
investment, determine the profit margin, investment turnover, and
return on investment of the Consumer Products Division, assuming
that...

The condensed income statement for the Consumer Products
Division of Fargo Industries Inc. is as follows (assuming no
service department charges):
Sales
$1,140,000
Cost of goods sold
513,000
Gross profit
$627,000
Administrative expenses
399,000
Income from operations
$228,000
The manager of the Consumer Products Division is considering
ways to increase the return on investment.
a. Using the DuPont formula for return on
investment, determine the profit margin, investment turnover, and
return on investment of the Consumer Products Division, assuming
that...

Profit Margin, Investment Turnover, and Rate of Return on
Investment
The condensed income statement for the International Division of
King Industries Inc. is as follows (assuming no service department
charges):
Sales
$884,000
Cost of goods sold
397,800
Gross profit
$486,200
Administrative expenses
176,800
Income from operations
$309,400
The manager of the International Division is considering ways to
increase the rate of return on investment.
a. Using the DuPont formula for rate of return
on investment, determine the profit margin, investment...

Divisional Income Statements and Return on Investment
Analysis
E.F. Lynch Company is a diversified investment company with
three operating divisions organized as investment centers.
Condensed data taken from the records of the three divisions for
the year ended June 30, 20Y8, are as follows:
Mutual Fund
Division
Electronic
Brokerage
Division
Investment
Banking
Division
Fee revenue
$1,360,000
$1,400,000
$1,380,000
Operating expenses
730,000
662,000
1,044,000
Invested assets
5,000,000
4,100,000
2,800,000
The management of E.F. Lynch Company is evaluating each division
as a...

Divisional income statements and return on investment
analysis
The Crunchy Granola Company is a diversified food company that
specializes in all
natural foods.
The company has three operating divisions organized as
investment centers. Condensed data taken
from the records of the three divisions for the year ended June
30, 20Y7, are as follows:
Cereal
Division
Snack Cake Division
Retail Bakeries Division
Sales
$28,000,000
$8,300,000
$10,050,000
Cost of goods
sold
16,970,000
5,875,000
7,095,000
Operating expenses
7,630,000
2,245,000
2,572,500
Invested
assets
10,300,000 ...

Divisional Income Statements and Return on Investment
Analysis
E.F. Lynch Company is a diversified investment company with
three operating divisions organized as investment centers.
Condensed data taken from the records of the three divisions for
the year ended June 30, 20Y8, are as follows:
Mutual Fund Division
Electronic Brokerage Division
Investment Banking Division
Fee revenue
$1,420,000
$1,470,000
$1,430,000
Operating expenses
764,800
696,000
1,082,000
Invested assets
5,200,000
4,300,000
2,900,000
The management of E.F. Lynch Company is evaluating each division
as a...

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