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A. Kerawang Sdn. Bhd., a furniture store, has two divisions, Wood and Steel. Below is the company's most recent monthly contribution format income statement.
A. Kerawang Sdn. Bhd., a furniture store, has two divisions, Wood and Steel. Below is the company's most recent monthly contribution format income statement. RM Sales 1,200,000 Variable expenses 564,000 Contribution Margin 636,000 Traceable fixed expenses: Advertising 240,000 Depreciation 112,000 Administration 176,000 Total 528,000 Divisional segment margin 108,000 Common fixed expenses 80000 Net operating income 28,000 Required: a) Given the average operating assets is RM350,000. Compute return on investment (ROI) in terms of margin and turnover. b) The management has shocked with the low ROI as obtained in (a). In an effort to (3 marks) isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information. Division Wood Steel Sales RM480,000 RM720,000 Variable expenses as a percentage of sales Traceable fixed expenses: 50% 45% Advertising RM96,000 RM144,000 Depreciation RM38,400 RM73,600 Administration RM81,600 RM94,400 Prepare a contribution format income statement segmented by divisions, as desired by the president. (13 marks) c) From the income statement, give a possible reason for low ROI obtained by Kerawang Sdn. Bhd.
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