Question

ABC Company operates two divisions with the following operating information for the month of May:

Division 1: sales, $120,000; operating income, $36,000; operating assets, $300,000.
Division 2: sales, $80,000; operating income, $40,000; operating assets, $400,000.

ABC Company expects a minimum return of 10% should be earned from all investments.

Required:
a. Prepare ABC Company’s ROI analysis using the DuPont model for each division. (Round Turnover rate answers to one decimal place.)
Division 1 Division 2 DuPont Performance Analysis: Revenues Operating Income Operating Assets Margin Turnover ROI % turns turns %

Answer 1

Margin = ( Operating income * 100 ) / Sales Turnover = [ Sales / Operating assets ] ROI = ( Operating Income * 100 ) / )perating Assets S 1, 20, Particulars A. Sales B. Operating income C. Operating Assets Margin (B/A) Turnover (A/C) ROI (B/c) Division -1 1,20,000 36,000 3,00,000 30.00 % 0.40 12 % $ $ $ $ Division -2 80,000 40,000 4,00,000 50.00 % 0.20 10 %