Selected operating data for two branches of Carolina Electrical Supply are provi
ID: 2591881 • Letter: S
Question
Selected operating data for two branches of Carolina Electrical Supply are provided below:
Item
Wilmington, NC Branch
Charleston, SC Branch
Sales
$4,000,000
$7,000,000
Average operating assets
$2,000,000
$2,000,000
Net operating income
$360,000
$420,000
Property, plant and equipment, net
$950,000
$800,000
Required:
A. Calculate the rate of return for each branch using the return on investment (ROI) formula stated in terms of margin and turnover. (Hint: Use the formula at the top of page 526 in the Noreen text).
B. Which Branch Manager seems to be doing the better job? Discuss
Item
Wilmington, NC Branch
Charleston, SC Branch
Sales
$4,000,000
$7,000,000
Average operating assets
$2,000,000
$2,000,000
Net operating income
$360,000
$420,000
Property, plant and equipment, net
$950,000
$800,000
Explanation / Answer
Answer:-A)-Retun on Investment:-
=(Net operating income/Sales)*(Sales*Average operating assets)
Wilmington, NC Branch =($360000/$4000000)*($4000000*$2000000)
=9%*2 =18%
Charleston, SC Branch=($420000/$7000000) *($7000000/$2000000)
=6%*3.5 =21%
B)-. In terms of ROI Charleston, SC Branch have (ie- 21%) greater than Wilmington, NC Branch (ie-18%) hence the Charleston, NC Branch seems to be doing the better job compare to Wilmington, NC Branch.
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