Required information The following information applies to th

Required information [The following information applies to the questions displayed below.J A food manufacturer reports the following for two of its divisions for a recent year. Beverage Division Cheese Division (Smillions) Invested assets, beginning Invested assets, ending Sales Operating income $4,468 $ 2,675 2,599 2,687 355 4,406 3,931 640 1. Compute return on investment. 2. Compute profit margin 3. Compute investment turnover for the year.

Solution

1

Calculate return on investment

Numerator

/

Denominator

=

Return on investment

Investment center

Operating income

Average invested assets

Beverage

355

/

2637

=

13.46%

Cheese

640

/

4437

=

14.42%

*Average invested assets

(2675+2599)/2

(4468+4406)/2

2

Calculate profit Margin

Numerator

/

Denominator

=

Return on investment

Investment center

Operating income

sales

Beverage

355

/

2687

=

13.21%

Cheese

640

/

3931

=

16.28%

3

Compute investment turnover for the year

Numerator

/

Denominator

=

Return on investment

Investment center

sales

Average invested assets

Beverage

2687

/

2637

=

1.02

Cheese

3931

/

4437

=

0.89

1	Calculate return on investment
		Numerator	/	Denominator	=	Return on investment
	Investment center	Operating income		Average invested assets
	Beverage	355	/	2637	=	13.46%
	Cheese	640	/	4437	=	14.42%
	*Average invested assets
	(2675+2599)/2
	(4468+4406)/2
2	Calculate profit Margin
		Numerator	/	Denominator	=	Return on investment
	Investment center	Operating income		sales
	Beverage	355	/	2687	=	13.21%
	Cheese	640	/	3931	=	16.28%
3	Compute investment turnover for the year
		Numerator	/	Denominator	=	Return on investment
	Investment center	sales		Average invested assets
	Beverage	2687	/	2637	=	1.02
	Cheese	3931	/	4437	=	0.89