A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31 is as follows:

Sales	$3,480,000
Cost of goods sold	2,248,000
Gross profit	$ 1,232,000
Operating expenses	710,000
Income from operations	$ 522,000
Invested assets	$2,900,000

Assume that the Electronics Division received no charges from service departments.

The president of Gihbli Industries Inc. has indicated that the divisions return on a $2,900,000 investment must be increased to at least 22.5% by the end of the next year if operations are to continue. The division manager is considering the following three proposals:

Proposal 1: Transfer equipment with a book value of $580,000 to other divisions at no gain or loss and lease similar equipment. The annual lease payments would be less than the amount of depreciation expense on the old equipment by $104,400. This decrease in expense would be included as part of the cost of goods sold. Sales would remain unchanged.

Proposal 2: Reduce invested assets by discontinuing a product line. This action would eliminate sales of $616,300, reduce cost of goods sold by $411,800, and reduce operating expenses by $181,300. Assets of $1,468,300 would be transferred to other divisions at no gain or loss.

Proposal 3: Purchase new and more efficient machinery and thereby reduce the cost of goods sold by $382,800 after considering the effects of depreciation expense on the new equipment. Sales would remain unchanged, and the old machinery, which has no remaining book value, would be scrapped at no gain or loss. The new machinery would increase invested assets by $1,450,000 for the year.

Required:

1. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for the Electronics Division for the past year. Round your answers to one decimal place.

	Electronics Division
Profit margin	fill in the blank b5e372f9cfbc014_1%
Investment turnover	fill in the blank b5e372f9cfbc014_2
ROI	fill in the blank b5e372f9cfbc014_3%

2. Prepare condensed estimated income statements and compute the invested assets for each proposal.

Gihbli Industries Inc.Electronics Division
Estimated Income Statements
For the Year Ended December 31
	Proposal 1	Proposal 2	Proposal 3
Sales	$fill in the blank c3383cfab055049_1	$fill in the blank c3383cfab055049_2	$fill in the blank c3383cfab055049_3
Cost of goods sold	fill in the blank c3383cfab055049_4	fill in the blank c3383cfab055049_5	fill in the blank c3383cfab055049_6
Gross profit	$fill in the blank c3383cfab055049_7	$fill in the blank c3383cfab055049_8	$fill in the blank c3383cfab055049_9
Operating expenses	fill in the blank c3383cfab055049_10	fill in the blank c3383cfab055049_11	fill in the blank c3383cfab055049_12
Income from operations	$fill in the blank c3383cfab055049_13	$fill in the blank c3383cfab055049_14	$fill in the blank c3383cfab055049_15
Invested assets	$fill in the blank c3383cfab055049_16	$fill in the blank c3383cfab055049_17	$fill in the blank c3383cfab055049_18

3. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for each proposal. Round your answers to one decimal place.

Proposal	Profit Margin	Investment Turnover	ROI
Proposal 1	fill in the blank 02929a028049044_1%	fill in the blank 02929a028049044_2	fill in the blank 02929a028049044_3%
Proposal 2	fill in the blank 02929a028049044_4%	fill in the blank 02929a028049044_5	fill in the blank 02929a028049044_6%
Proposal 3	fill in the blank 02929a028049044_7%	fill in the blank 02929a028049044_8	fill in the blank 02929a028049044_9%

4. Which of the three proposals would meet the required 22.5% return on investment.

Proposal 1
Proposal 2
Proposal 3

5. If the Golf Division were in an industry where the profit margin could not be increased, how much would the investment turnover have to increase to meet the president's required 22.5% return on investment? Enter your increase in investment turnover answer as a percentage of current investment turnover. If required, round your answer to one decimal place. fill in the blank 02929a028049044_13%