Margin = Revenue / Contribution Margin = 1,802,000/ $10,600,000 = 17%

• Asset Turnover = Revenue / Average Total Assets (not provided) = $10,600,000 / 8,153,000 = 1.3
• ROI = Margin Asset Turnover = 17 x 1.3 = 22.1%

Division 2 - Rope Division:

• Margin = Revenue / Contribution Margin = 2,152,000/6,725,000 = 32%
• Asset Turnover = Revenue / Average Total Assets (not provided) = 6,725,000 /8,406,250 = 0.8
• ROI = Margin Asset Turnover = 32 x 0.8 = 25.60%

Division 3 - Nylon Fibers Division:

• Margin = Revenue / Contribution Margin = 865,000 / 8,650,000 = 10%
• Asset Turnover = Revenue / Average Total Assets (not provided) = 8,650,000 /2,703,000 = 3.2
• ROI = Margin Asset Turnover = 10 x 3.2 = 32%

Suggestions for increasing ROI

The company should establish mechanisms for receiving feedback from division managers and employees and be willing to adapt strategies based on ongoing performance and market changes.

By applying these steps, Centex Yarns can work towards improving the ROI of each division, ensuring a systematic and tailored approach to address specific challenges and opportunities within each business unit. If you have specific details about Average Total Assets, those can be used to calculate Asset Turnover and provide a more accurate analysis.

 

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