Nue Wines Has the Following Data for Its Three Divisions

question 70

Essay

Nue Wines has the following data for its three divisions for the year:
$\begin{array}{lr}&\text {Ein }&\text {Zwei}&\text {Drei}\\\text { Revenues } & \$ 12,000,000&\$38,000,000&\$28,000,000 \\\text { Cost of sales } & 7,695,000&19,000,000&14,000,000 \\\text { Allocated corporate } & \\\text { overhead } & 720,000&2,280,000&2,100,000 \\\text { Other general \& } &\\\text { administration } & 1,585,000 & 11,000,000 & 11,000,000 \\\text { Return on } & & &\\\text {Investment }&15\%&12\%&9\%\end{array}$
Required:
a. Compute divisional operating income for each of the divisions. Assume taxes are 35%.
b. Calculate the profit margin ratio for each division.
c. Calculate the asset turnover for each division.

Understand the significance of fixed and variable costs in product pricing and profitability analysis.

Identify and calculate the total contribution margin under variable costing.

Differentiate between gross margin and contribution margin in costing approaches.

Understand the impact of cost structure decisions on financial performance and reporting.

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Definitions:

Demand

The desire to purchase goods and services backed by the ability and willingness to pay a certain price.

Supply

The total amount of a specific good or service that is available to consumers at a given time.

Usury Law

Legislation that imposes a maximum interest rate creditors can charge borrowers to protect consumers from excessively high rates.

Quantity

The amount or number of a material or immaterial thing not usually estimated by spatial measurement.