1. Use the following information to make the required calculations. Assume the Furniture division had average operating

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1 Use The Following Information To Make The Required Calculations Assume The Furniture Division Had Average Operating 1 (56.88 KiB) Viewed 27 times

1. Use the following information to make the required calculations. Assume the Furniture division had average operating assets of $6,500,000, and the Supplies division had average operating assets of $1,750,000, and a tax rate of 30%. Assume the cost of capital is 10%. Pool Accessories, Inc. Segmented Income Statements for the Current Fiscal Year Ended December 31 (dollar amounts are in thousands) Furniture Division Supplies Division Sales Cost of goods sold Gross margin Allocated overhead Selling and administrative expenses Operating income Income tax expense (30% rate) Net income $3,000,000 1,600,000 $1,400,000 375,000 250,000 5 775,000 232.500 $ 542,500 $1,000,000 430,000 $ 570,000 125,000 200,000 $ 245,000 73,500 $ 171,500 1. Calculate the profit margin ratio for each division. Which division is most profitable? 2. Using net income, which division is most profitable? 3. Calculate ROI for each division. What does ROI tell us about each division? 5. For cach division, calculate operating profit margin, asset turnover, and resulting ROI. 6. Which division has the highest ROI? What can be done to improve this ratio? 7. Calculate RI for each division. What does RI tell us about cach division?