To calculate the fixed asset turnover ratio for Mathai Company, follow these steps:
1. Identify the sales and the book values of fixed assets:
- Sales for the current year: \[tex]$4,800,000
- Book value of fixed assets at the beginning of the year: \$[/tex]1,450,000
- Book value of fixed assets at the end of the year: \$1,310,000
2. Calculate the average book value of the fixed assets:
The average book value is determined by taking the sum of the book value at the beginning of the year and the book value at the end of the year, and then dividing by 2.
[tex]\[
\text{Average Book Value} = \frac{(\text{Book Value at Beginning} + \text{Book Value at End})}{2} = \frac{(1,450,000 + 1,310,000)}{2} = \frac{2,760,000}{2} = 1,380,000
\][/tex]
3. Calculate the fixed asset turnover ratio:
The fixed asset turnover ratio is calculated by dividing the sales by the average book value of the fixed assets.
[tex]\[
\text{Fixed Asset Turnover Ratio} = \frac{\text{Sales}}{\text{Average Book Value}} = \frac{4,800,000}{1,380,000} \approx 3.478
\][/tex]
4. Compare the calculated turnover ratio with the given options:
Given the options:
a. 3.3
b. 1.2
c. 1.0
d. 3.1
The closest value to our calculated ratio of approximately 3.478 is not listed exactly. However, if there had to be the best approximate match given standard rounding to the first decimal place, none of the given options exactly match 3.478.
Therefore, among the choices provided, the actual fixed asset turnover ratio calculated does not precisely match any of the given options, which implies there might be a discrepancy in the provided choices. The correct ratio based on our calculation is approximately 3.478.
