Suppose the Operating Asset Turnover Ratio Increased by 35% and the Margin

question 1

Multiple Choice

Suppose the operating asset turnover ratio increased by 35% and the margin increased by 25%.What would be the effect on the divisional ROI?

• A)It would increase by 69%.
• B)It would decrease by 60%.
• C)It would increase by 20%.
• D)It would decrease by 50%.

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Definitions:

Prime Costs

The combination of direct materials and direct labor costs.

Direct Labor

The cost of wages for employees who are directly involved in the production of goods or services.

Direct Materials

The raw materials that are directly used in the manufacturing of a product, easily traceable to the finished product.

Equivalent Units Of Production

The number of production units that could have been completed within a given accounting period, given the resources consumed.