Calculating average operating assets, margin, turnover, and return on investmenteast mullett manufacturing earned operating income last year as shown in the following income statement: sales $531,250cost of goods sold 280,000gross margin $251,250selling and administrative expense 194,000operating income $57,250less: income taxes (@ 40%) 22,900 net income $34,350at the beginning of the year, the value of operating assets was $390,000. at the end of the year, the value of operating assets was $460,000.required: for east mullett manufacturing, calculate the following: 1. average operating assets $ 2. margin (round to two decimal places) %3. turnover (round to two decimal places) 4. return on investment (round to one decimal place) %

1. $425,000

2. 10.78%

3. 1.25

4. 13.5%

Explanation:

The computations are shown below:

1. For Average Operating Assets

Average operating assets = (Beginning Operating Assets + Ending Operating Assets) ÷ 2

= ($390,000 + $460,000) ÷ 2

= $425,000

2. For margin

Margin = Operating Income ÷ Sales × 100

            = $57,250 ÷ $531,250 × 100

            = 10.78%

3. For turnover:

Turnover = Sales ÷ Average Operating Assets

               = $531,250 ÷ $425,000

               = 1.25

4. For Return on investment:

Return on investment  = Operating Income ÷ Average Operating Assets

                                       = $57,250 ÷ $425,000

                                       = 13.5%

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