Dixie Company has the following data for 2011: Division A Sales $400,000 Contrib
ID: 2372062 • Letter: D
Question
Dixie Company has the following data for 2011:
Division
A
Sales $400,000
Contribution margin- 160,000
Operating income - 80,000
Average operating assets- 320,000
Division
B
Sales $300,000
Contribution margin- 125,000
Operating income - 30,000
Average operating assets- 200,000
Dixie Company has a target ROI of 20 percent.
Required: Calculate the following amounts for EACH
division:
A. Margin ratio
B. Turnover ratio
C. ROI
D. Residual Income
E. Evaluate the performance of these 2 division
managers.
Explanation / Answer
margin ratio of A= 160000/400000 = 40%
margin ratio of B = 125000/300000 = 41.67%
turn over ratio of A= 40000/320000= 1.25
turnover ratio of B = 300000/20000 = 1.5
ROI of A = 40% * 1.25 = 50%
ROIof B = 41.67% * 1.5 = 62.505%