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QUESTION -123 The condensed income statement for the Consumer Products Division of Milner Industries Inc. is as follows: Sales = $7,000,000 Cost of goods sold = $4,500,000 Gross profit = $2,500,000 Administrative expenses = $750,000 Income from operations = $1,750,000 The manager of the Consumer Products Division is considering ways to increase the rate of return on investments a) Using the DuPont Formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment of the Consumer Products Division, assuming that $5,000,000 of assets have been invested in the Consumer Products Division. b) If expenses could be reduced by $350,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and rate of return on investment for the Consumer Products Division? The following accounts and balances are taken from year end financial statements. 2007 2006 SALES $507,924,000 $392,190,000 COST OF SALES 330,466,000 249,667,000 GROSS MARGIN 177,458,000 142,523,000 OPERATING EXPENSES 91,444,000 75,646,000 NET OPERATING INCOME 86,014,000 66,877,000 INTERESTING EXPENSE 3,293,000 3,523,000 NET INCOME BEFORE TAXES 82,721,000 63,354,000 INCOME TAXES 27,530,000 20,900,000 NET INCOME 55,191,000 42,454,000 TOTAL ASSETS TOTAL CURRENT ASSETS $631,302,000 $534,815,000 $217,808,000 $180,021,000 Use the information to calculate return on assets for 2007.

QUESTION -123 The condensed income statement for the Consumer Products Division of Milner Industries Inc. is as follows: Sales = $7,000,000 Cost of goods sold = $4,500,000 Gross profit = $2,500,000 Administrative expenses = $750,000 Income from operations = $1,750,000 The manager of the Consumer Products Division is considering ways to increase the rate of return on investments a) Using the DuPont Formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment of the Consumer Products Division, assuming that $5,000,000 of assets have been invested in the Consumer Products Division. b) If expenses could be reduced by $350,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and rate of return on investment for the Consumer Products Division? The following accounts and balances are taken from year end financial statements. 2007 2006 SALES $507,924,000 $392,190,000 COST OF SALES 330,466,000 249,667,000 GROSS MARGIN 177,458,000 142,523,000 OPERATING EXPENSES 91,444,000 75,646,000 NET OPERATING INCOME 86,014,000 66,877,000 INTERESTING EXPENSE 3,293,000 3,523,000 NET INCOME BEFORE TAXES 82,721,000 63,354,000 INCOME TAXES 27,530,000 20,900,000 NET INCOME 55,191,000 42,454,000 TOTAL ASSETS TOTAL CURRENT ASSETS $631,302,000 $534,815,000 $217,808,000 $180,021,000 Use the information to calculate return on assets for 2007.

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter9: Responsibility Accounting And Decentralization
Section: Chapter Questions
Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...
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QUESTION -123 The condensed income statement for the Consumer Products Division of Milner Industries Inc. is as follows: Sales = $7,000,000 Cost of goods sold = $4,500,000 Gross profit = $2,500,000 Administrative expenses = $750,000 Income from operations = $1,750,000 The manager of the Consumer Products Division is considering ways to increase the rate of return on investments a) Using the DuPont Formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment of the Consumer Products Division, assuming that $5,000,000 of assets have been invested in the Consumer Products Division. b) If expenses could be reduced by $350,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and rate of return on investment for the Consumer Products Division? The following accounts and balances are taken from year end financial statements. 2007 2006 SALES $507,924,000 $392,190,000 COST OF SALES 330,466,000 249,667,000 GROSS MARGIN 177,458,000 142,523,000 OPERATING EXPENSES 91,444,000 75,646,000 NET OPERATING INCOME 86,014,000 66,877,000 INTERESTING EXPENSE 3,293,000 3,523,000 NET INCOME BEFORE TAXES 82,721,000 63,354,000 INCOME TAXES 27,530,000 20,900,000 NET INCOME 55,191,000 42,454,000 TOTAL ASSETS TOTAL CURRENT ASSETS $631,302,000 $534,815,000 $217,808,000 $180,021,000 Use the information to calculate return on assets for 2007.
Transcribed Image Text:QUESTION -123 The condensed income statement for the Consumer Products Division of Milner Industries Inc. is as follows: Sales = $7,000,000 Cost of goods sold = $4,500,000 Gross profit = $2,500,000 Administrative expenses = $750,000 Income from operations = $1,750,000 The manager of the Consumer Products Division is considering ways to increase the rate of return on investments a) Using the DuPont Formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment of the Consumer Products Division, assuming that $5,000,000 of assets have been invested in the Consumer Products Division. b) If expenses could be reduced by $350,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and rate of return on investment for the Consumer Products Division? The following accounts and balances are taken from year end financial statements. 2007 2006 SALES $507,924,000 $392,190,000 COST OF SALES 330,466,000 249,667,000 GROSS MARGIN 177,458,000 142,523,000 OPERATING EXPENSES 91,444,000 75,646,000 NET OPERATING INCOME 86,014,000 66,877,000 INTERESTING EXPENSE 3,293,000 3,523,000 NET INCOME BEFORE TAXES 82,721,000 63,354,000 INCOME TAXES 27,530,000 20,900,000 NET INCOME 55,191,000 42,454,000 TOTAL ASSETS TOTAL CURRENT ASSETS $631,302,000 $534,815,000 $217,808,000 $180,021,000 Use the information to calculate return on assets for 2007.
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