The Reed Division reports the following operating data for the past two years: The return on investment at Reed was exactly the same in Year 1 and Year 2.
-Sales in Year 2 amounted to:
A)$250,000
B)$300,000
C)$325,000
D)$350,000

Question

The Reed Division reports the following operating data for the past two years: The return on investment at Reed was exactly the same in Year 1 and Year 2.
-Sales in Year 2 amounted to:
A)$250,000 
B)$300,000 
C)$325,000 
D)$350,000

Quizplus · Accepted Answer

ROI in Year 1:
ROI = Margin F1F1F1S1F1F1F10 Turnover = 16% F1F1F1S1F1F1F10 2.5 = 40%
By assumption,the ROI is the same in Year 2 as in Year 1.Therefore,in Year 2:
Net operating income = ROI F1F1F1S1F1F1F10 Average operating assets = 40% F1F1F1S1F1F1F10 $150,000 = $60,000
Margin = Net operating income F1F1F1S1F1F1F10 Sales
Sales = Net operating income F1F1F1S1F1F1F10 Margin = $60,000 F1F1F1S1F1F1F10 20% = $300,000

The Reed Division Reports the Following Operating Data for the Past