Answer:
The average operating assets for Division Y = $125,000
Explanation:
Divisions Y
Sales ?
Net Operating Income 25,000
Average operating assets ?
Return on Investment 20%
Margin 0.05
Turnover ?
Target ROI 12%
Since we need average operating assets for division Y, we include those.
We know,
Return on Investment = Net Operating Income/ Average operating assets.
Return on investment is the ratio that is used to measure the company's profitability by using the efficient use of operating assets.
Therefore,
20% = $25,000/Average operating assets
Average operating assets x 20% = $25,000
Average operating assets = $25,000/20%
Average operating assets = $25,000/0.20
Average operating assets = $125,000
