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# Divison Margin, Turnover, ROI and RI

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Eban Wares is a division of a major corporation. The following data are for the latest year of operations:

Required:
a. What is the division's margin?
b. What is the division's turnover?
c. What is the division's return on investment (ROI)?
d. What is the division's residual income?

Adam Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 12,750 medals. The company normally charges \$120 per medal. Cost data for the current level of production are shown below:

The company has just received a special one-time order for 700 medals at \$83 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.

Required:
Should the company accept this special order? Why?

#### Solution Preview

Eban Wares is a division of a major corporation. The following data are for the latest year of operations:

Required:
a. What is the division's margin?

Margin = operating income / sales

= \$609,840 / \$10,890,000
=5.6%

b. What is the division's turnover?

Turnover = Sales / Operating Assets

= \$10,890,000 / \$3,000,000
= 3.63

c. What is the division's return on investment (ROI)?

ROI = Net Income / Operating Assets
= ...

\$2.19