turnover department efficiency A2 od manu ufacturer reports

turnover, department efficiency A2 od manu ufacturer reports the following for two of its divisions for a recent year. Exercise 22-12 Return on investment A1 A2 $ millions Beverage Division $2,662 2,593 2,681 349 Cheese Division Invested assets, beginning. Invested assets, ending Sales Operating income $4.455 4,400 3,925 634 raxt division, compute (1) return on investment, (2) profit margin, and () investment turnover for the Round answers to two decimal places.

Solution

Beverage Division:

Average Invested Assets = (Beginning Invested Assets + Ending Invested Assets) / 2
Average Invested Assets = ($2,662 + $2,593) / 2
Average Invested Assets = $2,627.50

Return on Investment = Operating Income / Average Invested Assets
Return on Investment = $349 / $2,627.50
Return on Investment = 13.28%

Profit Margin = Operating Income / Sales
Profit Margin = $349 / $2,681
Profit Margin = 13.02%

Investment Turnover = Sales / Average Invested Assets
Investment Turnover = $2,681 / $2,627.50
Investment Turnover = 1.02

Cheese Division:

Average Invested Assets = (Beginning Invested Assets + Ending Invested Assets) / 2
Average Invested Assets = ($4,455 + $4,400) / 2
Average Invested Assets = $4,427.50

Return on Investment = Operating Income / Average Invested Assets
Return on Investment = $634 / $4,427.50
Return on Investment = 14.32%

Profit Margin = Operating Income / Sales
Profit Margin = $634 / $3,925
Profit Margin = 16.15%

Investment Turnover = Sales / Average Invested Assets
Investment Turnover = $3,925 / $4,427.50
Investment Turnover = 0.89