Question: Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year:
Sales $980,000
Less: Variable expenses 670,000
Contribution margin $310,000
Less: Fixed expenses 172,800
Operating income $137,200
At the beginning of last year, Elway had $44,500 in operating assets. At the end of the year, Elway had $33,900 in operating assets.
Required: 1. Compute average operating assets.
2. Compute the margin and turnover ratios for last year.
3. Compute ROI.
4. Conceptual Connection: Briefly explain the meaning of ROI.
5. Conceptual Connection: Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company).