The Dry Wall Division reports the following operating data for the past two years:
$\begin{array}{lrr}
&\text { Year } 1& \text { Year } 2\
\text { Margin } & 16 \% & ? \
\text { Turnover } & 2.5 & 2.0 \
\text { Average operating assets } & ? & \$ 150,000 \
\text { Net operating income } & \$ 40,000 & ? \
\text { Stockholders' equity } & \$ 80,000 & \$ 125,000\
\text { Sales }&?&?
\end{array}$

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The return on investment at the Dry Wall Division was exactly the same in Year 1 and Year 2.
Net operating income in Year 2 amounted to:
A) $60,000.
B) $50,000.
C) $40,000.
D) $35,000.

Question

The Dry Wall Division reports the following operating data for the past two years:
$\begin{array}{lrr}
&\text { Year } 1& \text { Year } 2\
\text { Margin } & 16 \% & ? \
\text { Turnover } & 2.5 & 2.0 \
\text { Average operating assets } & ? & \$ 150,000 \
\text { Net operating income } & \$ 40,000 & ? \
\text { Stockholders' equity } & \$ 80,000 & \$ 125,000\
\text { Sales }&?&?
\end{array}$

-
The return on investment at the Dry Wall Division was exactly the same in Year 1 and Year 2.
Net operating income in Year 2 amounted to:
A) $60,000.
B) $50,000.
C) $40,000.
D) $35,000.

Quizplus · Accepted Answer

The return on investment (ROI) is calculated as net operating income divided by average operating assets. Since the ROI is the same in both years, we can set the ROI formula for Year 1 equal to the ROI formula for Year 2 and solve for the missing values.Year 1: ROI = Net operating income / Average operating assets0.16 = $40,000 / Average operating assetsAverage operating assets = $250,000Year 2: ROI = Net operating income / Average operating assets0.16 = Net operating income / $150,000Net operating income = $24,000

The Dry Wall Division Reports the Following Operating Data for the Past