Conner Manufacturing has two major divisions. Management wants to compare their relative performance. Information related to the two divisions is as follows:
Division 1:
Division 2:
Management discovers that the ROI is the same for both divisions, and wants a deeper evaluation.
Which division generates greater profitability per sales dollar?
A) Division 1
B) Division 2
C) Both divisions have the same return on sales ratio

Question

Conner Manufacturing has two major divisions. Management wants to compare their relative performance. Information related to the two divisions is as follows:
Division 1:
 Division 2:
 Management discovers that the ROI is the same for both divisions, and wants a deeper evaluation.
Which division generates greater profitability per sales dollar?
A) Division 1 
B) Division 2 
C) Both divisions have the same return on sales ratio

Quizplus · Accepted Answer

Return on Sales: Operating income/Sales
Division 1
Operating income: $200,000 - $150,000 = $50,000
Return on sales: $50,000 / $200,000 = 0.250
Division 2
Operating income: $45,000 - $35,000 = $10,000
Return on sales: $10,000 / $45,000 = 0.222 (rounded)
Division 1 has a greater Return on Sales.

Conner Manufacturing Has Two Major Divisions