Refer to information in Exercise 24-10. 

(1) Compute profit margin and investment turnover for each center.

(2) Which center generates more income per dollar of sales? 

(3) Which center has the better investment turnover?

Data From Exercise 24-10

Megamart provides the following information on its two investment centers.

1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income?
2. Assume a target income of 12% of average assets. Compute residual income for each center. Which center generated the most residual income?
3. Assume the Electronics center is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? The target return is 12%.

Transcribed Image Text:

Investment Center Sales Income Average Assets Electronics........ $40,000,000 $2,880,000 $16,000,000 Sporting Goods..... 20,000,000 2,040,000 12,000,000