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
	Margin	Turnover	ROI
Queensland division	6.00%	2.90	17.40%
New South Wales division	4.00%	4.80	19.20%
2
New South Wales division manager seems to be doing the better job
Workings:
Margin = Net operating income/Sales
Turnover = Sales/Average operating assets
ROI = Margin*Turnover
Queensland division :
Margin	6.00%	=102660/1711000
Turnover	2.90	=1711000/590000
ROI	17.40%	=6%*2.9
New South Wales division:
Margin	4.00%	=113280/2832000
Turnover	4.80	=2832000/590000
ROI	19.20%	=4%*4.8