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Carver Company's Balance Sheet and Income Statement Are Provided Below

Question 134

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Carver Company's balance sheet and income statement are provided below:
Carver CompanyBalance Sheet December 31 , Year 1 Assets  Cash $40,000 Accounts receivable 52,000 Inventory 80,000 Plant and equipment, net of depreciation 280,000 Land held for future plant expansion 76,000 Total assets $528,000 Liabilities and Stockholders’Equity  Accounts payable $45,000 Notes payable 58,000 Capital stock, no par 240,000 Retained earnings 185,000 Total liabilities and stockholders’ equity $528,000\begin{array}{c}\text {Carver Company}\\\text {Balance Sheet }\\\text {December 31 , Year 1}\\\begin{array}{lr}\text { Assets }\\\text { Cash } & \$ 40,000 \\\text { Accounts receivable } & 52,000 \\\text { Inventory } & 80,000 \\\text { Plant and equipment, net of depreciation } & 280,000 \\\text { Land held for future plant expansion } & \underline{76,000} \\\text { Total assets } &\underline{ \$ 528,000}\\\\\text { Liabilities and Stockholders'Equity }\\\text { Accounts payable } & \$ 45,000 \\\text { Notes payable } & 58,000 \\\text { Capital stock, no par } & 240,000 \\\text { Retained earnings } & \underline{185,000}\\\text { Total liabilities and stockholders' equity } & \underline{\$ 528,000}\end{array}\end{array}  Carver Company Income Statement  For the Year Ended December 31. Year Sales$330,000 Less variable costs: Manufacturing 68,000 Selling and administrative48,000 Contribution margin$214,000 Less fixed costs: Manufacturing68,000 Selling and administrative 56,000 Net income $90,000\begin{array}{c} \text { Carver Company}\\ \text { Income Statement }\\ \text { For the Year Ended December 31. Year}\\\begin{array}{lrr} \text { Sales} &\$330,000\\ \text { Less variable costs:} &\\ \text { Manufacturing } &68,000\\ \text { Selling and administrative} &\underline{48,000}\\ \text { Contribution margin} &\$214,000\\ \text { Less fixed costs:} &\\ \text { Manufacturing} &68,000\\ \text { Selling and administrative } &\underline{56,000}\\ \text { Net income } &\underline{\$90,000}\\\end{array}\end{array}

Required:
1)Compute the margin,turnover,and return on investment for Carver Company.
2)What is the advantage of expanding the ROI formula to measure margin and turnover separately?

Correct Answer:

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1)Margin = net income ÷ sales = $90,000 ...

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