Practice Problem 14.1 Health Quest operates fitness centers and organizes its operations into three geographical areas: Western, Midwestern, and Eastern Divisions. The following shows Health Quest's divisional income statements from last year. Sales Cost of sales Gross margin Operating expenses Allocated corporate overhead Operating income Income tax (30%) After-tax income Western Division $2,800,000 1.497.000 1,303,000 503,000 228,571 571,429 171.429 $ 400.000 Midwestern Eastern Division Division Total $2,226,000 $3,391,060 $8,417,060 1,201,000 1,648,059 4,346,059 1,025,000 1.743,001 4,071,001 385.000 663,000 1,551,000 182.857 308.572 720,000 457.143 771,429 1.800,001 137.143 231,429 540.001 $ 320,000 $ 540,000 $1.260.000 Practice Problem 14.2 (Continued from Demonstration Problem 1) The divisional balance sheets of Health Quest showed the investment bases (divisional assets) as follows. Division Western Division Midwestern Division Eastern Division Divisional Assets $2,000,000 1,720.000 2,550,000 Required: Calculate ROI and its associated profit margin ratio and asset turnover ratio for the three divisions of Health Quest. Practice Problem 14.1 Health Quest operates fitness centers and organizes its operations into three geographical areas: Western, Midwestern, and Eastern Divisions. The following shows Health Quest's divisional income statements from last year. Sales Cost of sales Gross margin Operating expenses Allocated corporate overhead Operating income Income tax (30%) After-tax income Western Division $2,800,000 1.497.000 1,303,000 503,000 228,571 571,429 171.429 $ 400.000 Midwestern Eastern Division Division Total $2,226,000 $3,391,060 $8,417,060 1,201,000 1,648,059 4,346,059 1,025,000 1.743,001 4,071,001 385.000 663,000 1,551,000 182.857 308.572 720,000 457.143 771,429 1.800,001 137.143 231,429 540.001 $ 320,000 $ 540,000 $1.260.000 Practice Problem 14.2 (Continued from Demonstration Problem 1) The divisional balance sheets of Health Quest showed the investment bases (divisional assets) as follows. Division Western Division Midwestern Division Eastern Division Divisional Assets $2,000,000 1,720.000 2,550,000 Required: Calculate ROI and its associated profit margin ratio and asset turnover ratio for the three divisions of Health Quest