ABC Company reported the following information for 2019: Sales .................
ID: 2525668 • Letter: A
Question
ABC Company reported the following information for 2019: Sales ............................... 14,000 units Margin .............................. 25% Variable cost per unit .............. $8.80 Average operating assets ............ $550,000 Return on investment ................ 14% Minimum required rate of return ..... 9% Management of ABC Company is beginning to budget for 2020 and would like answers to some what-if scenarios. Calculate the net operating income ABC Company needed to earn in 2019 in order for its turnover to be equal to 1.54.
Explanation / Answer
Assets Turnover = Sales / Average operating assets
1.54 = Sales / $550,000
Sales = $550,000*1.54
Sales = $847,000
Net operating income = $847,000*25%
Net operating income = $211,750