The Calculating Fashion Company Has Two Operating Divisions: North and South

question 38

Essay

The Calculating Fashion Company has two operating divisions: North and South. The following information was collected from its financial statements.
$$\begin{array} { l r r } & \text { North } & { \text { South } } \\\text { Operating income } & \$ 15,375 & \$ 9,160 \\\text { Sales } & 90,100 & 128,445 \\\text { Average operating assets } & 47,620 & 37,690\end{array}$$
Required:
The South Division has a goal to increase its ROI to 30% by the end of next year. Compute the increase (decrease) required in each of the following items in order to achieve this goal.
a. Operating assets
b. Total costs
c. Sales

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Definitions:

Economic Profit

The net gain or loss after removing both easily identifiable and not readily apparent expenses from the overall turnover.

Price

The amount of money or compensation given in exchange for goods or services in a market.

Diagram

A simplified representation or drawing that illustrates relationships or processes, often used in economics to demonstrate concepts or data visually.

Economic Profit

The difference between total revenues and total costs, including both explicit and implicit costs, representing the additional benefit over the next best alternative.