question archive Fixed Asset Turnover Ratio Financial statement data for years ending December 31 for Dennis Company follow: Year 2 Year 1Sales$1,831,360 $2,020,200 Fixed assets: Beginning of year571,000 521,000 End of year573,600 571,000 a
Fixed Asset Turnover Ratio Financial statement data for years ending December 31 for Dennis Company follow: Year 2 Year 1Sales$1,831,360 $2,020,200 Fixed assets: Beginning of year571,000 521,000 End of year573,600 571,000 a
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Fixed Asset Turnover Ratio
Financial statement data for years ending December 31 for Dennis Company follow:
Year 2 Year 1Sales$1,831,360 $2,020,200 Fixed assets: Beginning of year571,000 521,000 End of year573,600 571,000
a. Determine the fixed asset turnover ratio for Year 1 and Year 2. Round your answers to one decimal place.
Fixed asset turnoverYear 1fill in the blank 1
Year 2fill in the blank 2
b. Does the change in the fixed asset turnover ratio from Year 1 to Year 2 indicate a favorable or an unfavorable change?
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Assets Turnover ratio = Net sales / Average Fixed Assets
Average Fixed Assets = (Opening Assets + Ending Assets)/2
Year 1:
Assets Turnover ratio = 2020200 / (521000+571000)/2
= 2020200 / 546000
= 3.7
Year 2:
Assets Turnover ratio = 1831360 / (571000+573600)/2
= 1831360/ 572300
= 3.2
Requirement B:
Assets Turnover represent the Efficiently how company use its Fixed Assets to earn revenue
Asset Turnover ratio is Decrease hence the Variance is Unfavorable, Because Year 2 is Less Turnover ratio of 0.5 i.e.. (3.7-3.2)
