Question 21

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

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

Segmented Income Statements For the Current Fiscal Year Ended December 31
	Power Boat Division	Sailboat Division
Sales	$50,000,000	$80,000,000
Cost of goods sold	35,000,000	30.000,000
Gross margin	15,000,000	50,000,000
Allocated overhead (from corporate)	5,000,000	8,000,000
Selling and administrative expenses	2,000,000	4,000,000
Operating income	8,000,000	38,000,000
Income tax expense	3,000,000	10,000,000
Net income	$ 5,000,000	$28,000,000

Assume the Sailboat Division has average operating assets totaling $120,000,000 for the year.

The return on investment for the Sailboat Division is

a) 41.7%

b) 23.3%

c) 31.7%

d) 25.0% (rounded).