The condensed income statement for the International Division of Shakti Inc. is as follows (assuming no service
Question:
The condensed income statement for the International Division of Shakti Inc. is as follows (assuming no service department charges):
Sales .........................................$12,000,000
Cost of goods sold ....................(7,050,000)
Gross profit .............................$ 4,950,000
Administrative expenses ........(3,030,000)
Operating income ..................$ 1,920,000
The manager of the International Division is considering ways to increase the return on investment.
a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the International Division, assuming that $10,000,000 of assets have been invested in the International Division.
b. If expenses could be reduced by $120,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the International Division?
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