Progressive Company reported the following asset values in 2010 and 2011:

In addition, in 2011, Progressive had sales of $4,800,000; cost of goods sold for the year was $2,900,000. As of the end of 2010, the fair value of Progressive€™s total assets was $3,000,000. Of the excess of fair value over book value, $100,000 resulted from the fact that Progressive uses LIFO for inventory valuation. As of the end of 2011, the fair value of Progressive€™s total assets was $3,800,000, and Progressive€™s LIFO reserve was $150,000.

Instructions:
1. Compute Progressive€™s fixed asset turnover ratio for 2011.
2. Using the fair value of fixed assets instead of their book values, recomputed Progressive€™s fixed asset turnover ratio for 2011. State any assumptions that you make.
3. Progressive€™s primary competitor is Steady State. Steady State€™s fixed asset turnover ratio for 2011, based on publicly available information, is 2.5. Is Progressive more or less efficient at using its fixed assets than Steady State? Explain youranswer.

Transcribed Image Text:

2011 2010 Cash Accounts recelvable. Inventory Land Buildings. Equipment $ 50,000 4 300,000 650,000 600,000 900,000 350,000 $ 45,000 220,000 510,000 400,000 800,000 250,000