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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Margin, Turnover, Return on Investment

Pelak Company had sales of $25,000,000, expenses of $17,500,000, and average operating assets of $10,000,000.

Required:

Compute the (1) operating income, (2) margin and turnover ratios, and (3) ROI.

(1)

To determine

Calculate the amount of operating income.

Explanation

Operating Income:

The amount of earnings before charging any interest and tax is known as operating income. It is calculated by deducting the amount of expense by the sales revenue.

Use the following formula to calculate the operating income:

Operating income=Sales revenueExpense

Substitute $25,000,000 for sales revenue and $17,500,000 for expense in the above formula

(2)

To determine

Calculate margin and turnover ratios.

(3)

To determine

Calculate ROI.

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