Required information Use the following information for the E

Required information Use the following information for the Exercises below. [The following information applies to the q A food manufacturer reports the following for two of its divisions for a recent year. Beverage Division $2, 664 2,594 2, 682 350 Cheese Division $4,457 4,401 3, 926 635 (Smillions) Invested assets, beginning Invested assets, ending Sales Operating income Exercise 22-12 Return on investment LO A1, A2 1. Compute return on investment. 2. Compute profit margin. 3. Compute investment turnover for the year

Solution

Answer 1. Return on Investment Investment Center Operating Income / Average Invested Assets = Return on Investment Beverage                                     350 /                                            2,629 = 13.31% Cheese                                     635 /                                            4,429 = 14.34% Beverage Division Cheese Division Invested Assets Beginning                                 2,664                                            4,457 Ending                                 2,594                                            4,401 Average                                 2,629                                            4,429 Answer 2. Profit Margin Investment Center Operating Income / Sales = Return on Investment Beverage                                     350 /                                            2,682 = 13.05% Cheese                                     635 /                                            3,926 = 16.17% Answer 3. Investment Turnover Investment Center Sales / Average Invested Assets = Return on Investment Beverage                                 2,682 /                                            2,629 =                                         1.02 Cheese                                 3,926 /                                            4,429 =                                         0.89