Division D of Saunders Company has sales of $350,000, cost of goods sold of $120,000, operating expenses of $58,000, and invested assets of $150,000.
What is the rate of return on investment for Division D?
A) 153.3%
B) 114.7%
C) 87.2%
D) 233%

Question

Quizplus · Accepted Answer

To calculate the rate of return on investment, divide the operating income (which is sales minus cost of goods sold minus operating expenses) by the invested assets.

Operating Income = Sales - Cost of Goods Sold - Operating Expenses
Operating Income = $350,000 - $120,000 - $58,000
Operating Income = $172,000

Rate of Return on Investment = Operating Income / Invested Assets
Rate of Return on Investment = $172,000 / $150,000
Rate of Return on Investment = 1.147 or 114.7%

Therefore, the best choice is B with the explanation above.

Division D of Saunders Company Has Sales of $350,000, Cost