Required information [The following information applies to the questions display
ID: 2431698 • Letter: R
Question
Required information
[The following information applies to the questions displayed below.]
Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).
Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested assets?
Invested Assets Electronics $ 40,000,000 $ 2,880,000 $ 16,000,000 Sporting goods 20,000,000 2,040,000 12,000,000
Explanation / Answer
Answers
Working
Electronics
Sporting Goods
A
Income
$ 2,880,000.00
$ 2,040,000.00
B
Sales
$ 40,000,000.00
$ 20,000,000.00
C = (A/B) x 100
Profit Margin
7.20%
10.20%
Working
Electronics
Sporting Goods
A
Sales
$ 40,000,000.00
$ 20,000,000.00
B
Average Invested Assets
$ 16,000,000.00
$ 12,000,000.00
C = (A/B) x 100
Investment Turnover
2.5 times
1.67 times
Working
Electronics
Sporting Goods
A
Income
$ 2,880,000.00
$ 2,040,000.00
B
Sales
$ 40,000,000.00
$ 20,000,000.00
C = (A/B) x 100
Profit Margin
7.20%
10.20%
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