Auto Parts is a division of MPI International, located in Wadena, Saskatchewan. Auto Parts manufactures various automobile parts, such as bumpers, fenders, and axles, and sells them to major auto manufacturers. The division and its management are evaluated by senior corporate management on the basis of investment centre concepts. The following information pertains to operations of the Auto Parts division for 20X4:

Operating results:Total revenues...........................................$21,250,000Less: Direct variable costs............................8,750,000Contribution margin....................................12,500,000Less: Direct fixed costs..................................7,500,000Segment margin.............................................5,000,000Less: Allocated corporate costs....................3,938,000Operating income.......................................$ 1,062,000

Required:

1. Compute the margin, turnover, and ROI using operating income and the book value of average total operating assets.

2. Compute ROI replacing net income with segment margin when calculating the margin and average market value of operating assets.

3. Compute RI using operating income and the book value of average net assets. Assume that the required rate of return is 12%.

Transcribed Image Text:

Book Values Market Values December 31, December 31, December 31, 20X3 December 31, 20X3 20X4 20X4 $ 1,800,000 $ 1,250,000 Current assets Fixed assets 11,700,000 10,250,000 Accumulated depreciation (1,250,000) (1,750.000) $9,500,000 Total operating assets $10,250,000 $11,750,000 $10,500,000 $ 3,000,000 $ 3,500,000 Liabilities $ 7,250,000 $ 8,250,000 Net assets