Question 12

Note that data typically changes for each new question, even when the same company or product name is used.

Warwick, Inc. has two divisions as shown in the segmented income statement below.

Segmented Income Statements For the Current Fiscal Year Ended December 31
	Division A	Division B
Sales	$8,000,000	$2,000,000
Cost of goods sold	3,400,000	1,200,000
Gross margin	4,600,000	800,000
Allocated overhead (from corporate)	1,000,000	100,000
Selling and administrative expenses	600,000	300,000
Operating income	3,000,000	400,000
Income tax expense	2,000,000	300,000
Net income	$1,000,000	$ 100,000

Assume the Division B has average operating assets totaling $5,400,000 for the year. The return on investment for Division B is

a) 14.8%

b) 1.9%

c) 7.4%

d) 40.0% (rounded).