The following data pertain to the Waley Division of Northern Industries

Management Apr 25, 2021

The following data pertain to the Waley Division of Northern Industries.

the margin at Waley was exactly the same in Year 2 as it was in Year 1.

-ear 1 Year 2 Sales $300_,000 $600 J)00 Stoddioldcrs- c-quitv (,)f S-40_000 craggy operating assets aria ...... ...... ...... tr) 1.2 Rt_An-rn on ill\ estmnt hminu m rectutred rate of return Residual in me 10,00,)

The average operating assets for Year 2 amounted to:

$400,000

$800,000

$600,000

$500,00

Expert Solution

Computation of Average Operating Assets:

Average Operating Assets = Net Operating Income/Return on Investment

Here,

Profit Margin = Return on Investment/Turnover = 9.6%/1.2 = 8%

Net Operating Income = Sales*Profit Margin = $600,000*8% = $48,000

Average Operating Assets = $48,000/9.6% = $500,000

So, the correct option is D "$500,000".

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