The Portland Division's operating data for the past two years is as follows: The Portland Division's margin in Year 2 was 150% of the margin for Year 1. The net operating income for Year 1 was:
A)$192, 000
B)$128, 000
C)$266, 667
D)$208, 000

Question

The Portland Division's operating data for the past two years is as follows:  The Portland Division's margin in Year 2 was 150% of the margin for Year 1. The net operating income for Year 1 was:
A)$192, 000 
B)$128, 000 
C)$266, 667 
D)$208, 000

Quizplus · Accepted Answer

Year 2 ROI = Year 2 Margin × Year 2 Turnover
24% = Year 2 Margin × 2
Year 2 Margin = 24% ÷ 2 = 12%
Year 2 Margin = 150% × Year 1 Margin
12% = 150% × Year 1 Margin
Year 1 Margin = 12% ÷ 150% = 8%
Year 1 Margin = Year 1 Net operating income ÷ Year 1 Sales
8% = Year 1 Net operating income ÷ $1, 600, 000
Year 1 Net operating income = 8% × $1, 600, 000 = $128, 000

The Portland Division's Operating Data for the Past Two Years