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2 years ago

A food manufacturer reports the following for two of its divisions for a recent year.

Business

1 answer:

Mashutka [201]2 years ago

8 0

Answer:

a. Return on Investment

ROI= Operating income/Average invested assets

Beverage Division ROI = 358 / (2,680+2,602) /2

= 358 / 2,641

= 0.13555

= 13.56%

Cheese Division ROI = 643 / (4,473 + 4,409)/2

= 643 / 4,441

= 0.14478

= 14.48%

b. Profit margin

Profit Margin= Operating income / Sales

Beverage Division = 358 / 2690

= 0.13309

=13.31%

Cheese Division = 643 / 3934

= 0.16345

= 16.35%

c. Investment turnover for the year

Investment turnover = Sales / Average invested assets

Beverage Division = 2690 / 2641 = 1.02

Cheese Division = 3934 / 4441 = 0.89

d. Beverage$'m Cheese'million

Average Assets 2641 4441

Targeted return 8% 8%

Target income 211 355

Residual Income Beverage'm Cheese'm

Operating income 358 643

Less: Target income 211 355

Residual Income 147 288

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