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University Hero is considering expanding operations beyond its healthy sandwiches. Jim Axelrod, vice president of marketing, would like to add a line of smoothies with a similar health emphasis. Each

University Hero is considering expanding operations beyond its healthy sandwiches. Jim Axelrod, vice president of marketing, would like to add a line of smoothies with a similar health emphasis. Each smoothie would include two free health supplements such as vitamins, antioxidants, and protein. Jim believes smoothie sales should help fill the slow mid-afternoon period. Adding the line of smoothies would require purchasing additional freezer space, machinery, and equipment. Jim provides the following projections of net sales, net income, and average total assets in support of his proposal.

                              Sandwiches Only          Sandwiches and Smoothies
Net sales                     $ 900,000                             $ 1,500,000
Net income                    170,000                                   260,000
Average total assets       500,000                                  900,000

Required:
1. Calculate University Hero’s return on assets, profit margin, and asset turnover for sandwiches only.
2. Calculate University Hero’s return on assets, profit margin, and asset turnover for sandwiches and smoothies.
3. Based on these ratios, what recommendation would you make?

 

Aug 24 2020 Read more Less More

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