Question
Profit Margin, Investment Turnover, and return on investment The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming
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Profit Margin, Investment Turnover, and return on investment
The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges):
Sales $810,000 Cost of goods sold 364,500 Gross profit $445,500 Administrative expenses 243,000 Income from operations $202,500
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 $1,350,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place.
Profit margin Investment turnover Rate of return on investment
b. If expenses could be reduced by $40,500 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 Rate of return on investment
Profit Margin, Investment Turnover, and return on investment
The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges):
| Sales | $810,000 |
| Cost of goods sold | 364,500 |
| Gross profit | $445,500 |
| Administrative expenses | 243,000 |
| Income from operations | $202,500 |
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 $1,350,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place.
| Profit margin | |
| Investment turnover | |
| Rate of return on investment |
b. If expenses could be reduced by $40,500 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 | |
| Rate of return on investment |
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Managerial Economics Theory Applications and Cases
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
8th edition
978-0393124491, 393124495, 978-0039391277, 393912779, 978-0393912777
