Database Systems is considering expansion into a new product line. Assets to support expansion will cost $380,000. It is estimated that Database can generate $1,390,000 in annual sales, with an 6 percent profit margin.

Required:
What would net income and return on assets(investment) be for the year?

Net income = $83,400

Return on assets(investment) = 21.95%

Explanation:

We know,

Net income = Net sales × profit margin

Given,

Net sales = $1,390,000

profit margin = $380,000

Putting the values into the formula, we can get

Net income = Net sales × profit margin

Net income = $1,390,000 × 6%

Net income = $83,400

Again,

We know,

Return on assets(investment) = Net income ÷ Total asset (investment)

Given,

Total asset (investment) = $380,000

Net income = $83,400

Putting the values into the formula, we can get

Return on assets(investment) = $83,400 ÷ $380,000

Return on assets(investment) = 0.2195

Return on assets(investment) = 21.95%

urban company reports the following information regarding its production cost: units produced 37,000 units direct labor $ 30 per unit direct materials $ 35 per unit variable overhead $ 237,000 in total fixed overhead $ 127,000 in total

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