The following information pertains to the three divisions of Merrymount Company: $\begin{array}{lrrr}&\text { Division } X& \text { Division } Y& \text { Division } Z\
\text { Sales } & ? & ? & 1,250,000 \
\text { Net operating income } & \$ 36,000 & \$ 25,000 & \$ 7,000 \
\text { Average operating assets } & 300,000 & ? & ? \
\text { Retum on investment } & ? & 20 \% & 15 \% \
\text { Margin } & 0.10 & 0.05 & ? \
\text { Turnover } & 1.5 & ? & ? \
\text { Target ROI } & 15 \% & 12 \% & 10 \%
\end{array}$ What is the turnover for Division Z?
A)1.500
B)0.150
C)6.670
D)2.500

Question

Quizplus · Accepted Answer

The turnover for Division Z is calculated as Sales divided by Average Operating Assets. Given that the Return on Investment (ROI) is 15% and the Margin is unknown, we can use the formula ROI = Margin * Turnover. Since the Net Operating Income is $7,000 and the Sales are $1,250,000, the Margin is $7,000 / $1,250,000 = 0.0056. Therefore, Turnover = ROI / Margin = 0.15 / 0.0056 = 2.5.

The Following Information Pertains to the Three Divisions of Merrymount