S. Last year a company ad sales of $400,000, a capital 36%. The company\'s net o

Question

S. Last year a company ad sales of $400,000, a capital 36%. The company's net operating income for the year was ,000, a capital turnover of 2.4, and a return on investmenn ne income for the year was (choose the closest answer A $144,000 B. $120,000 C. 580,000 D. $60,000 E. $166.667 9. Ellyn Co. specializes in two products: records and cassettes. The company recorded a net operating income last year of $60,000, and provided the following information from last year using its products as segments: Product Cassettes Records $300,000 Sales $500,000 60% $80,000 Variable expense as a percentage of sales 80% Segment margin $30,000 What were the total fixed expenses for Ellyn Co. last year? A. $50,000 B. $220,000 C. $180,000 D. $150,000 E. $200,000

Explanation / Answer

8.

Sales = $400,000

Capital turnover = 2.4

The formula to calculate capital turnover is as follows:

Capital turnover = Sales/Investment

Put the above values for sales and capital turnover in the formula to calculate the amount of investment.

2.4 = $400,000/Investment

Or,

Investment = $400,000/2.4 = $166,667

Now, return on investment = 36%

The formula to calculate return on investment is as follows:

Return on investment = Net operating income/Investment

Put the value of return on investment and investment in the above formula to calculate the net operating income.

36% = Net operating income/$166,667

Or,

Net operating income = 36% x $166,667 = $60,000

Therefore,

The correct answer is D.

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