The Truck Division of Yang Motors Inc. has been experiencing revenue and profit growth during the years 2006€“2008. The divisional income statements are provided below.

Assume that there are no charges from service departments. The vice president of the division, Terry Clark, is proud of his division€™s performance over the last three years. The president of Yang Motors Inc., Billy Clark, is discussing the division€™s performance with Terry, as follows:
Terry: As you can see, we€™ve had a successful three years in the Truck Division.
Billy: I€™m not too sure.
Terry: What do you mean? Look at our results. Our income from operations has nearly tripled, while our profit margins are improving.
Billy: I am looking at your results. However, your income statements fail to include one very important piece of information; namely, the invested assets. You have been investing a great deal of assets into the division. You had $315,000 in invested assets in 2006, $810,000 in 2007, and $1,950,000 in 2008.
Terry: You are right. I€™ve needed the assets in order to upgrade our technologies and expand our operations. The additional assets are one reason we have been able to grow and improve our profit margins. I don€™t see that this is a problem.
Billy: The problem is that we must maintain a 20% rate of return on invested assets.

1. Determine the profit margins for the Truck Division for 2006€“2008.
2. Compute the investment turnover for the Truck Division for 2006€“2008.
3. Compute the rate of return on investment for the Truck Division for 2006€“2008.
4. Evaluate the division€™s performance over the 2006€“2008 time period. Why was Billy concerned about theperformance?

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Yang Motors Inc. Divisional Income Statements, Truck Division For the Years Ended December 31, 2006-2008 2006 2007 2008 Sales Cost of goods sold Gross profit Operating expenses Income from operations $756,000 475,200 $280,800 167,400 $113,400 $972,000 558,000 $414,000 209,880 $204,120 1,170,000 616,500 $ 553,500 261,000 $ 292,500