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2 August, 15:20

Calculating Average Operating Assets, Margin, Turnover, and Return on Investment East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales $531,250 Cost of goods sold 280,000 Gross margin $251,250 Selling and administrative expense 195,500 Operating income $55,750 Less: Income taxes (@ 40%) 22,300 Net income $33,450 At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. Required: For East Mullett Manufacturing, calculate the following: 1. Average operating assets $ 2. Margin (round to two decimal places) % 3. Turnover (round to two decimal places) 4. Return on investment (round to one decimal place)

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  1. 2 August, 19:07
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    1. $425,000

    2. 10.49%

    3. 1.25

    4. 13.11%

    Explanation:

    The computations are shown below:

    1. For Average operating assets

    = (Beginning Operating Assets + Ending Operating Assets) : 2

    = (390,000 + 460,000) : 2

    = $425,000

    2. For margin:

    = Net Operating Income : Sales * 100

    = $55,750 : $531,250 * 100

    = 10.49%

    3. For turnover:

    = Sales : Average Operating Assets

    = $531,250 : $425,000

    = 1.25

    4. For return on investment:

    = Net Operating Income : Average Operating Assets

    = $55,750 : $425,000

    = 13.11%
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