Selected information from the 2014 and 2013 financial statements of Pitney Corporation is presented below.

Pitney had cash sales of $750 and credit sales of $615 during 2014.Cost of goods sold for 2014 was $819.Pitney's fixed asset turnover for 2014 is
A)2.97.
B)4.86.
C)2.53.
D)5.53.

Question

Selected information from the 2014 and 2013 financial statements of Pitney Corporation is presented below.

Pitney had cash sales of $750 and credit sales of $615 during 2014.Cost of goods sold for 2014 was $819.Pitney's fixed asset turnover for 2014 is
A)2.97. 
B)4.86. 
C)2.53. 
D)5.53.

Quizplus · Accepted Answer

Fixed Asset Turnover = Sales / Average Fixed Assets
Sales = Cash Sales + Credit Sales = $750 + $615 = $1,365
Average Fixed Assets = (Beginning Fixed Assets + Ending Fixed Assets) / 2
From the provided information, we can only calculate the Cost of Goods Sold, and not the Beginning and Ending Fixed Assets for 2014. Therefore, we need to use the Fixed Asset Turnover for 2013 and assume it is the same for 2014.
Fixed Asset Turnover for 2013 = Sales / Average Fixed Assets = $1,183 / (($3,312 + $3,164) / 2) = 4.4
Assuming the Fixed Asset Turnover for 2014 is the same as in 2013, we can calculate the Average Fixed Assets for 2014 as follows:
Fixed Asset Turnover for 2014 = 4.4 = $1,365 / Average Fixed Assets
Average Fixed Assets = $1,365 / 4.4 = $310.23 million
Therefore, the Fixed Asset Turnover for 2014 is:
Fixed Asset Turnover = $1,365 million / $310.23 million = 4.4. Compare to Fixed Asset Turnover in 2013, there is a little growth in 2014. 
B is the correct answer.

Selected Information from the 2014 and 2013 Financial Statements of Pitney