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 $ 2,079,000 $ 3,224,000 $ 630,000 $ 620,000 $ 166,320 $ 209,560 $ 263,000 $ 213,000 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 % Required Required 2 >

Answer 1

Rate of Return for each divison using the return on Investment (ROI) formula in terms of margin and turnover ROI (return on investment) equals sales margins multiplied by Asset Turnover =Margin (%) * Firm Capital Turover Calculation of Margin (%) Queensland division New South Wales division =Net Operating Income/sales =Net Operating Income/sales = $ 166,320/$ 2,079,000 = $ 209,560/$3,224,000 8.00% 6.50% Calculation of Asset Turnover Queensland division New South Wales division -Sales/Average Operating Assets =$ 2,079,000/$ 630,000 =Sales/Average Operating Assets =$ 3,224,000/$ 620,000 3.3 5.2

Queensland division New South Wales division Margin 8.00% 6.50% Turnover 3.3 5.2 ROI 26.40% 33.80% 2 New South Wales is doing better

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