The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges): Sales $540,000 Cost of goods sold 243,000 Gross profit $297,000 Administrative expenses 135,000 Income from operations $162,000 The manager of the Consumer Products Division is considering ways to increase the return on investment. a.  Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $1,350,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin % Investment turnover   Rate of return on investment % b.  If expenses could be reduced by $27,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place. Profit margin % Investment turnover   Rate of return on investment %

Question

The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges):

Sales $540,000
Cost of goods sold 243,000
Gross profit $297,000
Administrative expenses 135,000
Income from operations $162,000

The manager of the Consumer Products Division is considering ways to increase the return on investment.

a.  Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $1,350,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place.

Profit margin %
Investment turnover  
Rate of return on investment %

b.  If expenses could be reduced by $27,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place.

Profit margin %
Investment turnover  
Rate of return on investment %

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