The Millard Division's operating data for the past two years are provided below: Millard Division's margin in Year 2 was 150% of the margin in Year 1.
The net operating income for Year 1 was:
A) $240,000
B) $256,000
C) $384,000
D) $768,000

Question

The Millard Division's operating data for the past two years are provided below:  Millard Division's margin in Year 2 was 150% of the margin in Year 1.
The net operating income for Year 1 was:
A) $240,000 
B) $256,000 
C) $384,000 
D) $768,000

Quizplus · Accepted Answer

Year 2 ROI = Year 2 Margin × Year 2 Turnover
36% = Year 2 Margin × 3
Year 2 Margin = 36% ÷ 3 = 12%
Year 2 Margin = 150% × Year 1 Margin
12% = 150% × Year 1 Margin
Year 1 Margin = 12% ÷ 150% = 8%
Year 1 Margin = Year 1 Net operating income ÷ Year 1 Sales
8% = Year 1 Net operating income ÷ $3,200,000
Year 1 Net operating income = 8% × $3,200,000 = $256,000

The Millard Division's Operating Data for the Past Two Years