need help with C1. I tried 770,000 for OI, and 38.50% ROI and it is wrong. Probl
ID: 2530435 • Letter: N
Question
need help with C1. I tried 770,000 for OI, and 38.50% ROI and it is wrong.
Problem 10-27 (Part Level Submission) Sanders Siding produces and sells two products-aluminum and vinyl. Each of these products is made in a dedicated manufacturing facility, and the product line managers are evaluated based on the product line's return on investment. The following data is from the most recent year of operations. AluminumViny Sales $4,000,000 $3,000,000 1,800,000 1,800,000 Direct fixed costs 1,500,000 900,000 2,000,000 1,200,000 Variable costs Average assets (a1) Your answer is correct. Calculate the margin and asset turnover for each product line. (Round answers to 2 decimal places, e.g. 5.12 and 5.1290.) Aluminum Vinyl 17.5 10 Margin Asset turnover Click if you would like to Show Work for this question: 2.5 Open Show WorkExplanation / Answer
Ans:
(a1) Aluminum Vinyl
Margin = Net profit /Sales = $700000/$4000000 $300000/$3000000
= 0.175=17.5% =0.10=10%
Asset Turnover= Sales/average Assets = $4000000/$2000000 $3000000/1200000
= 2 times = 2.5 times
(c1)
Contribution ratio in case of Aluminum= $1800000/$4000000=45%
New asset turnover for Aluminum= 2.20 times
Sales= 2.20*$2000000
= $4400000
Operating income= $4400000-variable costs ($4400000*45%)-Fixed cost(1500000)
= $4400000-$1980000-$1500000
= $920000
New return on investment= $920000/$2000000
= 46%
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