11 Sprint 0 411 PM eztomheducationcom 36 Question 2 of 6 10

.11 Sprint? * 0,+ 4:11 PM ezto.mheducation.com 36% Question 2 (of 6) 1.00 points Selected operating data for two divisions of Outback Brewing, Ltd of Australia are given below: Division New South Sales Average operating assets Net operating income Property, plant, and equipment (net) $936 000 $1972,000 $520,000 580,000 98.280 147.900 $249,000 199,000 Required Compute the rate of return for each division using the return on investment (ROl) formula stated in terms of margin and turnover (Round your answers to 2 decimal places.) Margin Queensland division New South Wales division 2 Which divisional manager seems to be doing the better job? Queensland division New South Wales division References eBook & Resources Worksheet Difficulty: 2 Medium Learning Objective: 11-01 Compute retun ROI) and show how changes in sales, ex assets affect RO Check my work

Solution

Ans 1.

Working Note:

Margin % = Net Operating Income / Sales

Queensland Division = ($98,280 / $936,000) * 100 = 10.5 %

New South Wales Division = ($147,900 / $1,972,000) * 100 = 7.5%

Asset Turnover = Sales / Average Operating Asset

Queensland Division = $936,000 / $520,000 = 1.8

New South Wales Division = $1,972,000 / $580,000 = 3.4

Return on Investment (ROI) = (Net Operating Income / Sales ) * ( Sales / Average Operating Assets)

Queensland Division (ROI) = 10.5 % * 1.8 = 18.9 %

New South Wales Division (ROI) = 7.5 % * 3.4 = 25.5%

Ans 2. The manager of New South Wales Division seems to be doing a better job as it return on investment is higher as compared to Queensland Division.

ROI basically indicates how effectively a company uses each dollar that is invested in assets to generate profits.

Division	Margin %	Turnover	ROI %
Queensland	10.5 %	1.8	18.9 %
New South Wales	7.5 %	3.4	25.5 %