4. Sorrento Company has three divisions-Northwest, South, and East. Segmented income statement information for the most...

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4. Sorrento Company has three divisions-Northwest, South, and East. Segmented income statement information for the most recent fiscal year ended December 31 is shown as follows. Assume average operating assets totaled $15,000,000 for the Northwest division, $6,500,000 for the South division, and $17,500,000 for the East division. Sorrento Company Segmented Income Statements for the Current Fiscal Year Ended December 31 (dollar amounts are in thousands) Northwest Division South Division East Division Sales $ 22,000,000 $8,000,000 $ 18,000,000 Cost of goods sold 10,000,000 2,000,000 7,000,000 Gross margin $ 12,000,000 $6,000,000 $ 11,000,000 Allocated overhead 4,125,000 1,500,000 3,375,000 Selling and administrative expenses 5,000,000 3,200,000 5,000,000 Operating income $2,875,000 $ 1,300,000 $ 2,625,000 Income tax expense (35% rate) 1,006,250 455,000 918,750 Net income $ 1,868,750 $ 845,000 $ 1,706,250 Required: a) For each division, calculate operating profit margin, asset turnover, and resulting return on investment. b) Which division has the highest return on investment? For the division that has the lowest return on investment, what can be done to improve this ratio? 4. Sorrento Company has three divisions-Northwest, South, and East. Segmented income statement information for the most recent fiscal year ended December 31 is shown as follows. Assume average operating assets totaled $15,000,000 for the Northwest division, $6,500,000 for the South division, and $17,500,000 for the East division. Sorrento Company Segmented Income Statements for the Current Fiscal Year Ended December 31 (dollar amounts are in thousands) Northwest Division South Division East Division Sales $ 22,000,000 $8,000,000 $ 18,000,000 Cost of goods sold 10,000,000 2,000,000 7,000,000 Gross margin $ 12,000,000 $6,000,000 $ 11,000,000 Allocated overhead 4,125,000 1,500,000 3,375,000 Selling and administrative expenses 5,000,000 3,200,000 5,000,000 Operating income $2,875,000 $ 1,300,000 $ 2,625,000 Income tax expense (35% rate) 1,006,250 455,000 918,750 Net income $ 1,868,750 $ 845,000 $ 1,706,250 Required: a) For each division, calculate operating profit margin, asset turnover, and resulting return on investment. b) Which division has the highest return on investment? For the division that has the lowest return on investment, what can be done to improve this ratio?