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Managerial Accounting: The Corners...
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Managerial Accounting: The Corners...
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)
Calculate the amount of operating income.
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:
Substitute $25,000,000 for sales revenue and $17,500,000 for expense in the above formula
(2)
Calculate margin and turnover ratios.
(3)
Calculate ROI.
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