Exercise 24-13 (Algorithmic) Check My Work (2 remaining) Profit Margin, Investme

Question

Exercise 24-13 (Algorithmic) Check My Work (2 remaining) Profit Margin, Investment Turnover, and Rate of Return on Investment The condensed income statement for the International Division of Kng industries fre-is as folows (assuming no service department charges Sales Cost of goods sold Gross profit $952,000 428,400 523,600 238,000 $285,600 Income from operations The manager of the international Division is considering ways to increase the rate of return on investment. a. Using the DuPont formula for rate of return on investment, determine the profit margin, Investment turnover and rate of return on investment of the International Division, assuming thaet $2,380,000 of assets have been invested in the International Division, Round all answers to one decimal place Proft margin Investment turnover Rate of return on investment b. If expenses could be reduced by $47,600 without decressing sales, what would be the impact on the profe margin, investment turmover, and rate of return on investment for the International Division? Round all answers to one decimal place. Profie margin Investment turnover Rate of return on investment

Explanation / Answer

a) Profit margin = 285600*100/952000 = 30%

Investment turnover = 952000/2380000 = 0.40

Rate of return on investment = 30%*.40 = 12%

b) Profit margin = 333200*100/952000 = 35%

Investment turnover = 952000/2380000 = 0.40

Rate of return on investment = 35%*.40 = 14%

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