Chapter 10, Problem 10.9BPE

a)

To determine

Fixed Asset turnover:

It is a ratio that measures the productive capacity of the fixed assets to generate the sales revenue for the company. Thus, it shows the relationship between the net sales and the average total fixed assets. The following is the formula to calculate the ratio:

$\text{Fixed}\text{Asset turnover }=\frac{\text{Sales}}{\text{Average total}\text{fixed assets}}$

The fixed asset Turnover Ratio of Company D for 2015 and 2016.

b)

To determine

To explain: whether the change in the fixed asset turnover ratio from 2015 to 2016 indicates a favorable or unfavorable change.