Devon Inc.has a profit margin of 12% and an investment turnover of 2.5.Sales revenue is $600,000.What is the operating income?
A)$180,000
B)$28,800
C)$72,000
D)$240,000

Question

Quizplus · Accepted Answer

First, we need to calculate the total investment made by Devon Inc.

Investment turnover = Sales revenue / Total investment
2.5 = $600,000 / Total investment
Total investment = $240,000

Now, we can use the profit margin formula to calculate the operating income:

Profit margin = Operating income / Sales revenue
0.12 = Operating income / $600,000
Operating income = $72,000

Therefore, the correct answer is C) $72,000.

Devon IncHas a Profit Margin of 12% and an Investment Turnover