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

question 67

Multiple Choice

The Millard Division's operating data for the past two years are provided below:
$\begin{array}{l}\begin{array} { | l | r | r | } \hline & \text { Year 1 } & \text { Year 2 } \\\hline \text { Return on Investment } & 12 \% & 36 \% \\\hline \text { Shareholders' Equity } & \$ 800,000 & \$ 500,000 \\\hline \text { Operating Income } & ? & \$ 360,000 \\\hline \text { Turnover } & ? & 3 \\\hline \text { Margin } & ? & ? \\\hline \text { Sales } & \$ 3,200,000 & ? \\\hline\end{array}\\\text { Millard Division's margin in Year } 2 \text { was } 150 \% \text { of the margin in Year } 1 .\end{array}$


-What were the average operating assets for Year 2?

• A) $1,000,000.
• B) $1,080,000.
• C) $1,200,000.
• D) $1,388,889.

---

Definitions:

Fixed Manufacturing Overhead

The consistent expenses tied to manufacturing that do not vary with the level of production, such as salaries of managerial staff and depreciation of equipment.

Direct Labor

Direct labor refers to the work contributed by employees who are directly involved in the manufacturing or production process of goods or services.

Financial Advantage

Refers to the benefit gained in financial terms, often understood as the competitive edge a company or individual has that allows for greater profit or more favorable economic outcomes.

Variable Costs

Costs that change in proportion to the level of production or sales activity, such as direct materials or sales commissions.