Margin, Turnover, Return on Investment, Average Operating Assets Park Company pr

Question

Margin, Turnover, Return on Investment, Average Operating Assets

Park Company provided the following income statement for last year:

At the beginning of last year, Park had $38,650 in operating assets. At the end of the year, Park had $41,350 in operating assets.

Required:

Compute ROI. Do not round interim calculations, but do round your final answer to two decimal places. If required, use a minus sign to indicate a negative ROI

Sales $90,000 Less: Variable expenses 54,000 Contribution margin $36,000 Less: Fixed expenses 19,600 Operating income $16,400

Explanation / Answer

ROI = Operating income / Average operating income

= $16,400 / [($38,650 + $41,350) / 2]

= $16,400 / $40,000

= 41%

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