Area Margin, Turnover, Return on Investment, Average Operating Assets

Elway Company provided the following income statement for the last year:

Sales $763,460,000

Less: Variable expenses 554,377,000

Contribution margin $209,083,000

Less: Fixed expenses 191,750,000

Operating income $17,333,000

At the beginning of last year, Elway had $38,643,000 in operating assets. At the end of the year, Elway had $41,321,000 in operating assets.

1. Compute average operating assets.

2. Compute the margin (as a percent) and turnover ratios for last year. If required, round your answers to two decimal places.

Margin

Turnover

3. Compute ROI as a percent. Use the part 2 final answers in these calculations and round the final answer to two decimal places.

4. ROI measures a companys ability to generate _____relative to its investment in assets. The greater the ROI, the ________ efficiently the company is generating from its assets.

5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company). A. Elway Company might be a service organization with relatively few physical assets required to generate its sales revenue and income. ROI will be higher when the factors that create a companys sales or income are not formally recognized as assets (e.g. human talent).

B. Elway Company might be a service organization with relatively few physical assets required and generates an income much higher than any manufacturing organization. ROI will be higher when the factors that create a companys sales or income are not formally recognized as assets (e.g. human talent).

C .Elway Company might be a service organization with relatively few physical assets required and generates an income much higher than any manufacturing organization. ROI will be higher when the factors that create a companys sales or income are not formally recognized as assets (e.g. goodwill).