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Profit Margin, Investment Turnover, and Return on Investment The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming
Profit Margin, Investment Turnover, and Return on Investment The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): Sales $1,386,000 Cost of goods sold (623,700) Gross profit $762,300 Administrative expenses (277,200) Operating income $485,100 The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, Investment turnover, and return on investment of the Consumer Products Division, assuming that $2,310,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin % Investment turnover Return on investment b. If expenses could be reduced by $69,300 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place. Profit margin % Investment turnover Return on investment % Decision on Transfer Pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $396 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $329 per unit. a. If a transfer price of $360 per unit is established and 42,300 units of materials are transferred, with no reduction in the Components Division's current sales, how much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? C. How much would the Components Division's operating income increase
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