MBA560 Financial and Managerial Accounting Module 8 Problem 1 - Creighton Company

MBA 560 Financial and Managerial Accounting
Module 8 Problem 1.
Creighton Company's balance sheet and income statement are provided below. Creighton Company Balance Sheet December 31, 2012 Cash 21,000 Accounts receivable 24,000 Inventory 15,000 Plant and equipment, net of depreciation 144,000 Land held for future plant expansion 36,000 Total Assets 240,000 Liabilities and Stockholders' Equity Accounts payable 18,000 Notes payable 30,000 Capital stock, no par 120,000 Retained earnings 72,000 Total Liabilities and stockholders' equity 240,000 Creighton Company Balance Sheet December 31, 2012
Sales 159,000
Less: variable costs Manufacturing 31,000
Selling and administrative 25,000
Contribution margin 103,000
Less: Fixed costs Manufacturing 31,000
Selling and administrative 22,500
Operating income 49,500

Required:
1) Compute the margin, turnover, and return on investment for Creighton Company
2) What is the advantage of expanding the ROI formula to measure margin and turnover separately?
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