Managerial Accounting
Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
Question
Book Icon
Chapter 9, Problem 23E

1.

To determine

To compute: Profit margin.

1.

Expert Solution
Check Mark

Explanation of Solution

Formula to calculate profit margin,

    ProfitMargin= NetIncome TotalRevenue ×100 ..................(1)

Professional products:

Given,
Net income is €552.
Total revenue is €2,717.

Substitute, €552 for net income and €2,717 for total revenue in the above equation (1).

    Profitmargin= 552 2,717 ×100 =20.31%

Hence, profit margin is 20.31%.

Consumer products:

Given,
Net income is €1,765.
Total revenue is €9.530.

Substitute, €1,765 for net income and €9,530 for total revenue in the above equation (1).

    Profitmargin= 1,765 9,530 ×100 =18.52%

Hence, profit margin is 18.52%.

Luxury products:

Given,
Net income is €791.
Total revenue is €4,507.

Substitute, €791 for net income and €4,507 for total revenue in the above equation (1).

    Profitmargin= 791 4,507 ×100 17.55%

Hence, profit margin is 17.55%.

Active cosmetics:

Given,
Net income is €278.
Total revenue is €1,386.

Substitute, €278 for net income and €1,386 for total revenue in the above equation (1).

    Profitmargin= 278 1,386 ×100 =20.05%

Hence, profit margin is 20.05%.

Hence, professional products division has the highest profit margin of 20.31%.

2.

To determine

To compute: Investment turnover.

2.

Expert Solution
Check Mark

Explanation of Solution

Formula to calculate investment turnover,

    Investmentturnover= Sales Averageinvestedassets ..............(2)

Professional products:

Given,
Sales are €2,717.
Average assets invested are €2,570.

Substitute, €2,717 for sales and €2,570 for average assets invested in the above equation (2).

    Investmentturnover= 2,717 2,570 =1.05

Hence, investment turnover is 1.05.

Working notes:

Calculation for average assets,

    Average assets= Beginning asset balance+Ending asset balance 2 = 2,516+2,624 2 =2,570

Consumer products:

Given,
Sales are €9,530.
Average assets invested are €5,745.

Substitute, €9,530 for sales and €5,745 for average assets invested in the above equation (2).

    Investmentturnover= 9,530 5,745 =1.65

Hence, investment turnover is 1.65.

Working notes:

Calculation for average assets,

    Average assets= Beginning asset balance+Ending asset balance 2 = 5,496+5,994 2 =5,745

Luxury products:

Given,
Sales are €4,507.
Average assets invested are €3,855.

Substitute, €4,507 for sales and €3,855 for average assets invested in the above equation (2).

    Investmentturnover= 4,507 3,855 =1.17

Hence, investment turnover is 1.17.

Working notes:

Calculation for average assets,

    Average assets= Beginning asset balance+Ending asset balance 2 = 4,059+3,651 2 =3,855

Active cosmetics:

Given,
Sales are €1,386.
Average assets invested are €823.5.

Substitute, €1,386 for sales and €823.5 for average assets invested in the above equation (2).

    Investmentturnover= 1,386 823.5 =1.68

Hence, investment turnover is 1.68.

Working notes:

Calculation for average assets,

    Average assets= Beginning asset balance+Ending asset balance 2 = 817+830 2 =823.5

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 9 Solutions

Managerial Accounting

Ch. 9 - Prob. 6DQCh. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Prob. 10DQCh. 9 - Prob. 11DQCh. 9 - Prob. 12DQCh. 9 - Prob. 13DQCh. 9 - Prob. 14DQCh. 9 - Prob. 15DQCh. 9 - Prob. 16DQCh. 9 - Prob. 17DQCh. 9 - Prob. 18DQCh. 9 - Allocation and measurement terms C1 In each blank...Ch. 9 - Basis for cost allocation C1 In each blank next...Ch. 9 - Prob. 3QSCh. 9 - Prob. 4QSCh. 9 - Prob. 5QSCh. 9 - Prob. 6QSCh. 9 - Prob. 7QSCh. 9 - Prob. 8QSCh. 9 - Computing return on investment A1 Compute return...Ch. 9 - Computing residual income A1 Refer to the...Ch. 9 - Prob. 11QSCh. 9 - Computing profit margin and investment turnover A2...Ch. 9 - Performance measures__balanced scorecard A3...Ch. 9 - Prob. 14QSCh. 9 - Prob. 15QSCh. 9 - Prob. 16QSCh. 9 - Prob. 17QSCh. 9 - Prob. 18QSCh. 9 - Prob. 19QSCh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Prob. 3ECh. 9 - Prob. 4ECh. 9 - Prob. 5ECh. 9 - Prob. 6ECh. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Prob. 10ECh. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Exercise 22-16 Performance measures-balanced...Ch. 9 - Prob. 17ECh. 9 - Prob. 18ECh. 9 - Prob. 19ECh. 9 - Prob. 20ECh. 9 - Prob. 21ECh. 9 - Prob. 22ECh. 9 - Prob. 23ECh. 9 - Prob. 1PSACh. 9 - Prob. 2PSACh. 9 - Prob. 3PSACh. 9 - Prob. 4PSACh. 9 - Prob. 5PSACh. 9 - Prob. 1PSBCh. 9 - Prob. 2PSBCh. 9 - Prob. 3PSBCh. 9 - Prob. 4PSBCh. 9 - Prob. 5PSBCh. 9 - Santana Rey’s two departments, computer consulting...Ch. 9 - Prob. 1AACh. 9 - Prob. 2AACh. 9 - Prob. 3AACh. 9 - Prob. 1BTNCh. 9 - Prob. 2BTNCh. 9 - Prob. 3BTNCh. 9 - Prob. 4BTNCh. 9 - Prob. 5BTNCh. 9 - Prob. 6BTN
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education