Problem 9-20

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lially for senior bank officials to approve. Monthly operating a Cost budgeted expenses. Revenues from the department's service ncome by the bank and are not reflected on the computer reated as otherin g these clients are included in the computer department reports costs of servicing bureau activities are ager of the computer department has pro to a profit or investment center. the machin- president of supervisors, ervisor. The sponsibilit ter departmek oposed that bank management however Required be the characteristics that differentiate a cost center, a profit center, and an investment cen- ter from each other. ould the manager of the computer department be likely to conduct the operations of the depart- t differently if the department were classified as a profit center or an investment center ment than as a cost center? Expl 9-20A Return on investment LO 9-2 rento Corporation's balance sheet indicates that the company has $500,000 invested in operating ts. During 2018, Sorrento earned operating income of $50,000 on $1,000,000 of sales. CHECK FIGURES c. 10.00% d. (3) 12.50% Required a. Compute Sorrento's profit margin for 2018. b. Compute Sorrento's turnover for 2018. Compute Sorrento's return on investment for 2018. d. Recompute Sorrento's ROl under each of the following independent assumptions (I) Sales increase from $1,000,000 to $1,200,000, thereby resulting in an increase in operating income from $50,000 to $56,000. (2) Sales remain constant, but Sorrento reduces expenses, resulting in an increase in operating income from $50,000 to $52,000. (3) Sorrento is able to reduce its invested capital from $500,000 to $400,000 without ffecting operating income