Question

Griffin corp. is evaluating its piquette division, an investment center. the division has a $60,000 controllable margin and $400,000 of sales. how much will griffin's average operating assets be when its return on investment is 10%?

Answer 1

Given:
Controllable margin = 60,000
sales = 400,000
return on investments = 10%

Return on investments = net profit / average operating assets

10% = 60,000 / ave. operating assets.

Average operating assets = 60,000 / 10%
Average operating assets = 600,000

Griffin's average operating assets will be 600,000 when its return on investment is 10%.