Mastery Problem: Return on Investment, margin, and turnover Question Content Area Return on Investment (ROI) The manager of an investment center should be evaluated based on revenues, costs, and investments. An evaluation based on net income ignores the amount of investment the investment center required. One way to measure operating profit in relation to investment is a calculation called the return on investment. One formula for calculating return on investment is: Operating income Invested Assets ROI is effective because it takes into consideration the three factors under the control of an investment center manager: revenues, costs, and investments. ROI measures the income (or return) earned on each dollar of investment. APPLY THE CONCEPTS: Calculating return on investment The divisional income statements for three divisions of the Duvall Company are shown. Duvall Company Divisional Income Statements For the Year Ending December 31, 2012 Division A Division B Division C Sales Revenue $1,560,000 $782,500 $504,000 Operating expenses (920,400) (586,875) (267,120) Operating income before service department charges $639,600 $195,625 $236,880 Service department charges (358,800) (67,295) (120,960) Operating income $280,800 $128,330 $115,920 Additional financial data from the three divisions of the Duvall Company are shown. Division A Division B Division C Invested assets $1,040,000