The following information pertains to the three divisions of Marlow Company:
$\begin{array}{lrrr}
& \underline{\text { Division} X} & \underline{\text { Division } Y} & \underline{ \text { Division Z }}\
\text { Sales } & ? & ? & 1,250,000 \
\text { Net operating income } & \$ 36,000 & \$ 25,000 & \$ 75,000 \
\text { Average operating assets } & 300,000 & ? & ? \
\text { Return on investment } & ? & 20 \% & 15 \% \
\text { Margin } & 0.10 & 0.05 & ? \
\text { Turnover } & 1.5 & ? & ? \
\text { Target ROI } & 15 \% & 12 \% & 10 \%
\end{array}$
-Refer to the figure.What is the turnover for Division Z?
A)0.150
B)1.500
C)2.500
D)6.670

Question

Quizplus · Accepted Answer

The turnover is calculated as Sales divided by Average Operating Assets. For Division Z, the Return on Investment (ROI) is 15%, and the Margin is not given. However, ROI is also calculated as Margin multiplied by Turnover. Given that the Net Operating Income is $75,000 and the Sales are $1,250,000, the Margin is $75,000 / $1,250,000 = 0.06. Therefore, Turnover = ROI / Margin = 0.15 / 0.06 = 2.5.

The Following Information Pertains to the Three Divisions of Marlow