Question

Crane Company is evaluating its Piquette division, an investment center. The division has a $66000 controllable margin and $480000 of sales. How much will Crane’s average operating assets be when its return on investment is 10%?

Answer 1

Answer:

$600,000

Explanation:

Data provided in the question:

Controllable margin = $66,000

Sales = $480,000

Return on investment = 10%

Now,

Return on investment  = Controllable Margin ÷ Average Operating Assets

or

10% = $60,000 ÷ Average Operating Assets

or

Average Operating Assets = 60000 ÷ 10%

or

Average Operating Assets = 60000 ÷ 0.01

or

Average Operating Assets = $600,000