Exercise 11-8 Computing and Interpreting Return on Investment (ROI) [LO11-1] Sel

Question

Exercise 11-8 Computing and Interpreting Return on Investment (ROI) [LO11-1] Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: New South Wales Queensland Sales Average operating assets Net operating income Property, plant, and equipment (net) 2,176,000 $ 3,445,000 $ 640, 000 650, 000 $ 250,240 275,600 $ 264, 000 214,000 Required 1. Compute the rate of return for each division using the return on investment (ROl) formula stated in terms of margin and turnover. 2. Which divisional manager seems to be doing the better job? Complete this question by entering your answers in the tabs below Required 1Required 2 Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. (Round your answers to 2 decimal places.) Margin Turnover ROI Queensland division New South Wales division Required 1 Required 2>

Explanation / Answer

1. The correct answer is :

2. The manager of Divison New Southwales seems to be doing better as the ROI for this division is higher.

The correct answer is New South Wales

Note :

ROI = Margin * Turnover

Margin = Net operating income / Sales

Turnover = Sales / Average Operating Assets

Hence,

Margin Turnover ROI Queensland 11.50 % 3.40 % 39.10 % New South Wales 8.00 % 5.30 % 42.40 %

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