Question
Pool Accessories, Inc., has two divisionsFurniture and Supplies. Assume for both divisions that the tax rate is 30 percent, and the cost of capital is
- Pool Accessories, Inc., has two divisionsFurniture and Supplies. Assume for both divisions that the tax rate is 30 percent, and the cost of capital is 8%. The following segmented financial information is for the most recent fiscal year ended December 31.
Furniture Division | Supplies Division | |
Sales | $3,000,000 | $1,000,000 |
Cost of goods sold | 1,600,000 | 430,000 |
Allocated overhead | 375,000 | 125,000 |
Selling and administrative expenses | 250,000 | 200,000 |
Average net operating assets | $8,500,000 | 2,100,000 |
- Using Return on Investment as the measure of profitability, which division is most profitable? (Show your calculations) (10.4)
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