42. Operating Profit Margin, Asset Turnover, Return on Investment (ROI), and Residual Income (RI). Financial information for Livingston Tech Support, Inc., for the most recent fiscal year appears as follows. All dollar amounts are in thousands. Livingston Tech Support, Inc. Segmented Income Statements for the Current Fiscal Year (dollar amounts are in thousands) Web Division IT Division Sales $ 6,000 $ 9,000 2,300 2,700 Cost of goods sold Gross margin $ 3,700 $ 6,300 Allocated overhead (from corporate) 1,200 1,800 1,850 3,350 Selling and administrative expenses Operating income $ 650 $ 1,150 Income tax expense (30% rate) 195 345 Net income $ $ 455 $ 805 Livingston Tech Support, Inc. Segmented Balance Sheets at End of Most Recent Fiscal Year (dollar amounts are in thousands) Web Division IT Division Ending Balance Beginning Balance Ending Balance Beginning Balance Assets Cash $ 400 $ 390 $ 1.100 $ 1.150 Accounts 300 310 600 620 receivable Inventory 800 730 950 900 Total current assets $ 1,500 $ 1,430 $ 2,650 $ 2,670 2,670 Property, plant and equipment (net) 2,000 1,800 6.100 6,020 Investment in Global, Inc. 1,500 1,500 Land (held for sale) 2.100 2.100 0 0 Total assets $ 5,600 $ 5,330 $ 10,250 $ 10,190 Liabilities and owners' equity Accounts payable $ 590 $ 610 $ 1.150 $ 980 Other current liabilities 160 145 420 300 Total current liabilities $ 750 $ 755 $ 1.570 $ 1.280 Long-term liabilities 0 0 0 0 Total $ 750 $ 755 $ 1,570 $ 1.280 liabilities Total owners equity 4,850 4,575 8.680 8.910 Total liabilities and owners' equity $ 5,600 $ 5,330 $ 10,250 $ 10,190 Required: Required: a Calculate average operating assets for each division. (Hint: land held for sale and investments in Global, Inc., are not operating assets.) b. Calculate operating profit margin, asset turnover, and return on investment for each division. IT Division Ending Beginning Balance Balance 42. Operating Profit Margin, Asset Turnover, ROI, and RI (Note: All dollar amounts are in thousands as presented in the textbook.) a. Web Division Ending Beginning Balance Balance Total assets $5,600 Less: Land held for sale (2.100) Less: Investment in Global Inc. Total operating assets $3,500 Average operating assets Incorrect Incorrect b. Web Division IT Division Web Division is IT Division is Incorrect $650 $6,000 Correct Correct Incorrect Incorrect Incorrect Operating profit margin = Operating Income Sales (round to nearest hundredth % Asset turnover = Sales Average Operating Assets (round to nearest hundredth ROI = Operating Profit Margin X Asset Turnover Incorrect MULTI Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect
