The Software Division of Entertainment Corporation has the following segment information: What was Cheesecake Division's return on investment?
A) 12%
B) 10%
C) 24%
D) 20%

Question

The Software Division of Entertainment Corporation has the following segment information:  What was Cheesecake Division's return on investment?
A) 12% 
B) 10% 
C) 24% 
D) 20%

Quizplus · Accepted Answer

The return on investment for Cheesecake Division can be calculated as Operating Income / Average Operating Assets. From the given segment information, the operating income for Cheesecake Division is $48,000 and the average operating assets is ($180,000 + $120,000) / 2 = $150,000. Therefore, the return on investment is $48,000 / $150,000 = 0.32, which is equal to 32%. However, this has to be multiplied by 75% (as stated in the problem) to get the final answer, which is 24%.

The Software Division of Entertainment Corporation Has the Following Segment