Question

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Sales Average operating assets Net operating income Property, plant, and equipment (net) Division New South Queensland Wales $ 1,711,000 $2,832,000 $ 590,000 $ 590,000 $ 102,660 $ 113,280 $ 259,000 $ 209,000 Required: 1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. 2. Which divisional manager seems to be doing the better job? Complete this question by entering your answers in the tabs below. Required 1 Required 2. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. (Round your answers to 2 decimal places.) Margin Turnover ROI Queensland division New South Wales division

Answer 1

1
Sales	Net Operating Income	Average Operating Assets	ROI
4200000	300000	780000	38.46%
4300000	311000	780000	39.87%
4400000	322000	780000	41.28%
4500000	333000	780000	42.69%
4600000	344000	780000	44.10%
4700000	355000	780000	45.51%
2
Return on Investment (ROI) increases as Sales increases
Workings:
Sales	Net Operating Income
4200000	300000	=(4200000*0.11)-162000
4300000	311000	=(4300000*0.11)-162000
4400000	322000	=(4400000*0.11)-162000
4500000	333000	=(4500000*0.11)-162000
4600000	344000	=(4600000*0.11)-162000
4700000	355000	=(4700000*0.11)-162000
Return on Investment (ROI) = Net Operating income/Average Operating Assets