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

question 130

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:
Compute the following ratios for each division:
a. Profit margin
b. Asset turnover
c. Return on investment (ROI)

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Definitions:

Single Plantwide Factory Overhead Rate

A method of allocating manufacturing overhead costs uniformly across all units produced within a single factory.

Direct Labor Hours

The total hours worked by employees who are directly involved in the production of goods or services.

Regular Widget Production

The routine manufacture of a standardized product, often referred to in examples to illustrate production and economic concepts.

Multiple Production Department Factory Overhead Rate

A costing method that calculates separate overhead rates for each department within a manufacturing facility, reflecting the different types of activities and costs in each department.