Question

Problem 3 (Testbook Reference 9-7)-Determine margin, turnaver, and return en isvestment for a segment and the effect en each when the variables are changed The manager of the Winston Company faced the folloing data for the year 2015 Contrbution to indirect espenses Assets directly uned by and ideneified with the segment Saks s 1,800,000 S 22.500,000 S 36,000,000 Required: Determine the effect on margin, tamover, and return on investment of the segment in 2015 if each of the following changes uere to occur. Comsider each change separately and asune that any items not specifically mentioned remain the same as in 2014 I. A campaign to control costs resulted in S180,000 of reduced expenses. Round cach answer to two decimal places Calculate segment income if the above changes were to occur a) b) Calculate segment iavestment if the above changes were to occur Calculate segment sales if the above changes were to occur c) d) Calculate segment margin itf the above changes were to occur Calculate segment tursover if the above changes were to occur e) n Calculate segment ROI if the above changes were to occur 2. Certain nonproductive assets were eliminated. As a result, investment decreased by $900,000, and expenses decreased by $72.000. Round each answer to two decimal places (1) Calculate segment income if the above changes were to occur (2) Calculate segment investment if the above changes were to occur (3) Cakulate segment sales if the above changes were to occur (4) Calculate segment margin if the above changes were to occur (5) Calculate segment turnoner if the above changes were to occur (6) Calculate segment ROI if the above changes were to occur:

Answer 1

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Winston Company
Effect on Income	Scenario 1	Note	Scenario 2	Note	Scenario 3	Note	Scenario 4	Note
Sales	36,000,000.00	No Change	36,000,000.00	No Change	39,600,000.00	Increase by 3,600,000. i.e. $ 36,000,000+3,600,000	36,360,000.00	Increase by 360,000. i.e. $ 36,000,000+360,000
Less: Cost of goods sold	-		-		2,700,000.00	Increase by 2,700,000	-
Gross Margin	36,000,000.00		36,000,000.00		36,900,000.00		36,360,000.00
Less: Operating Expenses	1,620,000.00	Decrease by 180,000. i.e. $ 1,800,000-180,000	1,728,000.00	Decrease by 72,000. i.e. $ 1,800,000-72,000	2,340,000.00	Increase by 540,000. i.e. $ 1,800,000+540,000	1,854,000.00	Increase by 54,000. i.e. $ 1,800,000+54,000
Operating Income	34,380,000.00		34,272,000.00		34,560,000.00		34,506,000.00
Effect on Investment	22,500,000.00		21,600,000.00	Decrease by 900,000. i.e. $ 22,500,000-900,000	22,500,000.00		23,400,000.00	Increase by 900,000. i.e. $ 22,500,000+900,000
Margin	95.50%		95.20%		87.27%		94.90%
Income/ Sales
Turnover	1.60		1.67		1.76		1.55
Sales/ Investment
ROI	152.80%		158.67%		153.60%		147.46%
Income/ Investment
Note: You have not given cost of goods sold. Please put cost of goods sold on your own to arrive at the correct figure. Rest all is ok.