Arlington Clothing, Inc., shows the following information for its two divisions for year 1. Lake RegionCoastal RegionSales revenue$4,160,000 $13,070,000 Cost of sales 2,691,300 6,535,000 Allocated corporate overhead 249,600 784,200 Other general and administration 553,900 3,755,000 Required:a. Compute divisional operating income for the two divisions. Ignore taxes.b-1. What are the gross margin and operating margin percentages for both divisions?b-2. How well have these divisions performed?

Ratio analysis is a method of measuring the financial position of the organization with different kinds of ratios such as liquidity ratio, profitability ratio, solvency ratio. These ratios help to compare two or more financial statements.Gross margin percentage = Gross margin / Sales revenue Lage region = 1468,700 / 4160,000 = 0.3530 or 35.30 % Coastal region = 6535,000 / 13070,000 = 0.50 or 50 % Operating margin = Operating income / Sales revenue Lage region = 665,200 / 4160,000 = 0.1599 or 16% Coastal region = 1995,800 / 1370,000 = 0.1527 or 15.27% Divisional income is a greater then coastal region and gross margin Gross margin percentage is higher in coastal region.

Answered: Arlington Clothing, Inc., shows the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Arlington Clothing, Inc., shows the following information for its two divisions for year 1.

	Lake Region	Coastal Region
Sales revenue	$	4,160,000	$	13,070,000
Cost of sales		2,691,300		6,535,000
Allocated corporate overhead		249,600		784,200
Other general and administration		553,900		3,755,000

Required:

a. Compute divisional operating income for the two divisions. Ignore taxes.

b-1. What are the gross margin and operating margin percentages for both divisions?

b-2. How well have these divisions performed?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions