Profit Margin, Investment Turnover, and Return on Investment The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): Sales Cost of goods sold Gross profit Administrative expenses $1,296,000 (583,200) $712,800 (453,600) $259,200 Operating income The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $2,160,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin Investment turnover Return on investment 5 X % Investment turnover Return on investment b. If expenses could be reduced by $64,800 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place. Profit margin % %

Profit Margin, Investment Turnover, and Return on Investment The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): Sales Cost of goods sold Gross profit Administrative expenses $1,296,000 (583,200) $712,800 (453,600) $259,200 Operating income The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $2,160,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin Investment turnover Return on investment 5 X % Investment turnover Return on investment b. If expenses could be reduced by $64,800 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place. Profit margin % %

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

Section: Chapter Questions

Problem 7E: Consider the following list of scorecard measures: a. Product profitability b. Ratings from customer...

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Profit Margin, Investment Turnover, and Return on Investment The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): Sales Cost of goods sold Gross profit Administrative expenses Operating income The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $143,750,000 of assets have been invested in the Consumer Products Division. If required, round your answers to one decimal place. Profit margin $230,000,000 (126,500,000) $103,500,000 (64,400,000) $39,100,000 Investment turnover Return on investment % Investment turnover Return on investment b. If expenses could be reduced by $3,450,000 without decreasing sales, what would be the impact on the profit margin, investment…
Profit Margin, Investment Turnover, and return on investment The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges): Sales Cost of goods sold Gross profit Administrative expenses Income from operations The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $1,950,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin Investment turnover Rate of return on investment Profit margin Investment turnover $1,170,000 526,500 $643,500 409,500 $234,000 b. If expenses could be reduced by $58,500 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on…
APPLY THE CONCEPTS: Target income (sales revenue) Another useful method for figuring out the type of performance your company will need to reach a target income is by using sales revenue. Rather than using the number of units, this method uses total sales revenue. In companies for which the total set of goods produced and sold is more varied, this would be the preferred method, as opposed to a business in which only one product is sold. Assume a company has pricing and cost information as follows: Price and Cost Information Amount Selling Price per Unit $30 Variable Cost per Unit $15 Total Fixed Cost $15,000 For the upcoming period, the company wishes to generate operating income of $40,000. Given the cost and pricing structure for the company’s product, how much sales revenue must it generate to attain its target income? Step 1: Calculate the contribution margin ratio: The contribution margin ratio is the contribution margin in proportion to the selling price on a…
The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed a. cost-volume-profit analysis b. contribution margin analysis c. budgetary analysis d. gross profit analysis In a profit center, the manager has responsibility and authority for making decisions that affect a. assets b. investments c. long-term liabilities d. costs
Cost-volume-profit (CVP) analysis for revenue planning determines: The desired profit level of a firm. Both revenue maximization and cost minimization. The costs associated with a certain level of revenue. The max amount of revenue a firm can receive. The revenue required to achieve a desired profit level.
Return on investment (ROI) is computed in the following manner: ROI is equal to turnover multiplied by earnings as a percent of sales. Turnover is sales divided by total investment. Total investment is current assets (inventories, accounts receivable, and cash) plus fixed assets. Earnings equal sales minus the cost of sales. The cost of sales consists of variable production costs, selling expenses, freight and delivery, and administrative costs. Complete parts a and b. a. Construct an influence diagram that relates these variables. Choose the correct diagram below. Click here to view influence diagram D. Click here to view influence diagram C. Click here to view influence diagram A. Click here to view influence diagram B. b. Develop a mathematical model using the symbols defined on the left. E: Earnings T: Turnover ROI = T = E = S: Sales TI = C = C: Cost of Sales TI: Total Investment CA: Current Assets FA: Fixed Assets PC: Prod Costs SC: Sales Expense FC: Freight and Delivery AC: Admin…
What can the weighted average contribution margin ratio be used for? To solve for a measure, at any level of sales volume, of the sensitivity of operating profit to changes in volume. Breakeven and profit planning for sales volume expressed in dollars (Y) rather than units (Q). To calculate an average per-unit contribution margin based on an assumed sales mix. To figure out the relative proportion in which a company’s products (or services) are sold. To determine the extent of fixed costs in an organization’s cost structure.
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Tennair Corporation manufactures cooling system components. The company has gathered the following information about two of its customers: Evans Equipment and Rogers Refrigeration. Evans Equipment Sales revenue Rogers Refrigeration $ 160,000 61,000 Cost of goods sold General selling costs $ 229,000 102,000 37,000 23,800 28,500 General administrative costs 17,850 Cost-driver data used by the firm and traceable to Evans and Rogers are: Customer Activity Sales activity Order taking Special handling Special shipping Customer Activity Sales activity Order taking Special handling Special shipping Cost Driver Sales visits Sales orders Units handled Shipments Evans Equipment 12 visits 31 orders 460 units. 33 shipments Pool Rate $ 970 278 44 460 Rogers Refrigeration 9 visits 36 orders 410 units 44 shipments Required: A. Perform a customer profitability analysis for Tennair. Compute the gross margin and operating income on transactions related to Evans Equipment and Rogers Refrigeration.
Below is a list of various metrics used to measure performance. For each metric, identify the correct balanced scorecard perspective with which the metric is associated. Metric Balanced Scorecard Perspective Average stock price Economic value added Employee turnover rates Manufacturing cycle time Market share Number of days from product launch to shelf Number of defects Number of new patent applications Percentage of repeat customers Percentage decrease in operating costs Percentage of sales generated by new products Research and development spending as a percentage of net revenues options: Customer Financial Internal Business Learning and Growth
a. What is the box annual sales volume for each area to be able to compete on a competitive advantage strategy with competitors? b. What do you suggest to the company based on the cost data above for the location of its factory construction? Explain why and use the calculation data so that decision making can be in accordance with the company strategy that you have learned.
Investment Center Sales. Net income Average invested assets Profit margin Investment turnover Return on investment Profit Margin: Investment Center A B Investment Turnover: Investment Center A B Choose Numerator: Investment Center Use the information in the table above to compute each department's contribution to overhead (both in dollars and as a percent). (Round your final answers to 2 decimal places.) Return on investment: A B Choose Numerator: Choose Numerator: 1 A 1 $ $ 584,600 $1,580,000 ? 1 10% ? ?% B $12,200,000 $ $ 1 Choose Denominator: Choose Denominator: 1 Choose Denominator: ? ? ?% 1.3 13% = Profit Margin Profit margin 10.00 % % = Investment Turnover = Investment turnover 1.30 Return on investment = Return on investment % 13.00 %