Question

Kelfour Enterprises has divided its operations into two divisions. Relevant accounting data for each division is as follows: Divisions Sales Operating Assets Operating Income Western Division $ 150,000 $ 100,000 $ 15,000 Eastern Division $ 300,000 $ 150,000 $ 16,500 Based on this information Multiple Choice The Eastern Division is outperforming the Western Division because it has more operating income. The Eastern Division is outperforming the Western Division because it has more operating assets. The Eastern Division is outperforming the Western Division because it has more sales revenue. None of the answers is correct.

Answer 1

The correct option is d. None of the answers is correct.

Step-by-step explanation:

Margin : The margin denotes the ratio between net operating income and sales so that the we know how much the company is earning profit during a particular year.

So,

The formula to calculate the margin = Net operating income ÷ Sales

Based on the given information which is mentioned in the question:

The western Division margin = Net operating income ÷ Sales

= $15,000 ÷ $ 150,000

= 0.1

The eastern Division margin = Net operating income ÷ Sales

= $ 16,500 ÷ $300,000

= 0.055

Since, by considering above calculations, we get to know that the western division margin has higher margin than eastern division margin by 0.045

Therefore, the correct option is d. None of the answers is correct