How calculate the invested capital

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Question - Billings Company is a decentralised wholesaler with two autonomous divisions. The divisions are evaluated on the basis of return on investment (ROD), with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company's two divisions - X and Y for the most recent year are given below:

 

Division X

Division Y

Sales

$10,500,000

$458,000

Cost of goods sold

6,000,000

316,000

Operating expenses

3,200,000

58,000

Invested capital at the beginning of the year

3,000,000

1,200,000

Invested capital at the end of the year

5,000,000

2,000,000

The company had an overall ROI of 15% last year. The company is considering an expansion project in the upcoming year. The project would be implemented by one of the two divisions. The following data relate to the project:

Expansion project

Sales

$2,000,000

Cost of goods sold

1,200,000

Operating expenses

640,000

Invested capital

1,000,000

Required - How calculate the invested capital?

Reference no: EM132754951

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