The Electronics Division of Anton Company reports the following results for the current year: $\begin{array}{ll}
\text { Revenues } & \$ 800,000 \
\text { Operating expenses } & \$ 656,000 \
\text { Operating income } & \$ 144,000 \
\text { Operating assets } & \text { \$ } 1,200,000
\end{array}$ Anton Company has set a target return on investment (ROI) of 11% for the Electronics Division. The Electronic Division's return on investment is:
A) 11.25%.
B) 12%.
C) 66.7%.
D) 18%.

Question

The Electronics Division of Anton Company reports the following results for the current year: $\begin{array}{ll}
\text { Revenues } & \$ 800,000 \
\text { Operating expenses } & \$  656,000 \
\text { Operating income } & \$ 144,000 \
\text { Operating assets } & \text { \$ } 1,200,000
\end{array}$ Anton Company has set a target return on investment (ROI) of 11% for the Electronics Division. The Electronic Division's return on investment is:
A) 11.25%.
B) 12%.
C) 66.7%.
D) 18%.

Quizplus · Accepted Answer

ROI = (Operating Income / Average Total Assets) x 100%
Operating Income = Sales - COGS - Operating Expenses = $4,000,000 - $2,500,000 - $500,000 = $1,000,000
Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2 = ($7,500,000 + $5,000,000) / 2 = $6,250,000

ROI = ($1,000,000 / $6,250,000) x 100% = 16%

Since the target ROI is 11%, the Electronics Division's ROI is higher than the target. The closest answer choice is B, which gives a ROI of 12%.

The Electronics Division of Anton Company Reports the Following Results