Question

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 of the Consumer Products
Division, assuming that $1,330,000 of assets have been invested in
the Consumer Products Division. Round the investment turnover to
one decimal place.

Profit margin | % |

Investment turnover | |

Return on investment | % |

**b.** If expenses could be reduced by $39,900 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 | |

Return on investment | % |

Answer #1

Profit Margin, Investment Turnover, and return on investment
The condensed income statement for the Consumer Products
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service department charges):
Sales
$1,144,000
Cost of goods sold
514,800
Gross profit
$629,200
Administrative expenses
400,400
Income from operations
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The manager of the Consumer Products Division is considering
ways to increase the return on investment.
a. Using the DuPont formula for return on
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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...

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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...

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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
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ways to increase the return on investment.
a. Using the DuPont formula for return on
investment, determine the profit margin, investment turnover, and
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Profit Margin, Investment Turnover, and Rate of Return on
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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...

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Division of Fargo Industries Inc. is as follows (assuming no
service department charges):
Sales
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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...

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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...

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The company has three operating divisions organized as
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30, 20Y7, are as follows:
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Division
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$8,300,000
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Cost of goods
sold
16,970,000
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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:
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Division
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Brokerage
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Banking
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$1,670,000
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1,180,400
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5,000,000
3,400,000
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