Kelfour Enterprises has divided its operations into two divisions. Relevant acco
ID: 2449215 • Letter: K
Question
Kelfour Enterprises has divided its operations into two divisions. Relevant accounting data for each division is as follows:
Based on this information
a. The Eastern Division is outperforming the Western Division because it has more operating income.
b. The Eastern Division is outperforming the Western Division because it has more operating assets.
c. The Eastern Division is outperforming the Western Division because it has more sales revenue.
d. None of the answers is correct.
Divisions Sales Operating Assets Operating Income Western Division $ 150,000 $ 100,000 $ 15,000 Eastern Division $ 300,000 $ 150,000 $ 16,500Based on this information
a. The Eastern Division is outperforming the Western Division because it has more operating income.
b. The Eastern Division is outperforming the Western Division because it has more operating assets.
c. The Eastern Division is outperforming the Western Division because it has more sales revenue.
d. None of the answers is correct.
Explanation / Answer
Answer: Option d - None of the answers is correct
The outperformance of one division to other can be ascertained by comparing the ratio of operating income to sales or operating income to operating asset.
In the given case:
In both the occasion the western division has outperformed eastern division. so none of the above answer is correct.
Divisions Sales Operating Assets Operating Income Operating income/sales Operating income/Operating Asset Western Division 150000 100000 15000 0.10 0.15 Eastern Division 300000 150000 16500 0.06 0.11Related Questions
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