Megamart a retailer of consumer goods provides the following

Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Average Sales nvestment Center Electronics sted Asset $32,600,000 $2,771,000 15,744,000 1,968,000 $16,300,000 12,300,000 Sporting goods Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested assets? Complete this question by entering your answers in the tabs below Investment Profit Margin Turnover Compute profit margin for each department. Which department generates the most net income per dollar of sales? Profit Margin Choose Denominator:Profit Margin Profit Margin Choose Numerator: Center Electronics Sporting Goods Which department generates the most net income per dollar of sales?

Solution

Computation of profit margin Profit margin =Income / Sales Investment Center Income / Sales = Profit margin Electronics $2,\'771,000 /$32,600,000 0.085 Sporting goods $1,968,000 /$15,744,000 0.125 department of Sporting Goods is gernerates more net income per dollars sales Computation of investment turnover Investment Turnover Investmetn center Sales /Average investment =investment Turnover Electronics $32,600,0000 /$16,300,000 2 Sporting goods $15,744,000 / $12,300,000 1.28 Departmetn of Electronics is most efficient at generating sales from average invested assets