The condensed income statement for the International Division of King Industries Inc. is as follows (assuming no service department charges): Sales $1,200,000 Cost of goods sold 600,000 Gross profit $600,000 Administrative expenses 300,000 Income from operations $300,000 The manager of the International Division is considering ways to increase the rate of return on investment. 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 International Division, assuming that $2,000,000 of assets have been invested in the International Division. b. If expenses could be reduced by $60,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and rate of return on investment for the International Division?

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 13E: The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as...
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The condensed income statement for the International Division of King Industries
Inc. is as follows (assuming no service department charges):
Sales
$1,200,000
Cost of goods sold
600,000
Gross profit
$600,000
Administrative expenses 300,000
Income from operations $300,000
The manager of the International Division is considering ways to increase the rate of
return on investment.
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 International
Division, assuming that $2,000,000 of assets have been invested in the International
Division.
b. If expenses could be reduced by $60,000 without decreasing sales, what would be
the impact on the profit margin, investment turnover, and rate of return on
investment for the International Division?
Transcribed Image Text:The condensed income statement for the International Division of King Industries Inc. is as follows (assuming no service department charges): Sales $1,200,000 Cost of goods sold 600,000 Gross profit $600,000 Administrative expenses 300,000 Income from operations $300,000 The manager of the International Division is considering ways to increase the rate of return on investment. 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 International Division, assuming that $2,000,000 of assets have been invested in the International Division. b. If expenses could be reduced by $60,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and rate of return on investment for the International Division?
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