Investment Center $11,700,000 Sales Net income Average invested assets Profit ma

Question

Investment Center $11,700,000 Sales Net income Average invested assets Profit margin Investment turnover Return on investment 489,600 $1,530,000 $ 8% 79 79 12% Use the information in the following table to compute each department's contribution to overhead (both in dollars and as a percent) (Round your final answers to 2 decimal places.) Profit Margin: Choose Numerator: Choose Denominator: Profit Margin Investment Center Net income Sales Profit margin 489,600 8.00% 11,700,000 Investment Turnover: Choose Numerator: Choose Denominator: Investment Turnover Investment Center Sales Average invested assets Investment turnover 1,530,000 11,700,000 / 1.50 Return on investment: Choose Numerator: | | Choose Denominator: Return on investment Investment Center Net income Average invested assets Return on investment 489,600 I$ 1,530,000 1 2 .00%

Explanation / Answer

Formulas are correctly inserted.

Profit margin:

Investment Centre A :- Sales figure is missing so sales = 489600 / 8 % = $ 6120000

Investment Centre B :-

As we know that ROI = Profit margin * Investment Turnover

So Profit margin = ROI / Investment Turnover

= 12% / 1.5 = 8 %

SO, net income = 11700000 * 8 % = $ 936000

Investment Turnover :

Investment Centre A :- 6120000 / 1530000 = 4

Investment Centre B :- Avg. Invested assets = 11700000 / 1.5 = $ 7800000

ROI :

Investment Centre A :- 489600 / 1530000 = 32 %

Investment Centre B :- 936000 / 7800000 = 12 %

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