Brockman Pickle Company produces gourmet dill pickles. Selected results from the most current year were as follows:
Sales revenue ....... $3,600,000
Operating income ..... 540,000
Average total assets .... 4,000,000

Production manager Maria Brockman is investigating the purchase of a new brining station that will increase the plant's production capacity. Based on her research, Maria thinks the station would cost $160,000 and would increase sales revenue by $200,000 and operating profit by $30,000.

a. Calculate Brockman's current margin, asset turnover, and return on investment.
b. Calculate Brockman's margin, asset turnover, and return on investment assuming the company purchases the new brining station.
c. Assume Maria Brockman's annual bonus is based on the company's return on investment.
Will Maria support the purchase of the new brining station? Why or why not?

  • CreatedFebruary 21, 2014
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