Income Ratios and Asset Turnover Zara, Spain luxury fashion house that manufactures clothing, fragrance, and fashion accessories, had net income of £210 million on sales of £1,495 million in 2012. (£ is the British currency, the pound.)

The company’s operating statistics for 2012 included the following:

Operating return on sales 14.85%

Operating return on average total assets 19.61%

Total asset turnover 1.50

Return on shareholders’ equity 31.29%

1. Compute the following 2012 amounts for Zara:

a. Operating income and Average total assets.

b. Average shareholders’ equity

Activity-based costing (abc) is not truly a cost collection mechanism as much as it is an inventory valuation method. the main purpose for implementing an activity-based cost system is to try to overcome some of the cost distortions that occur in traditional costing from product differences when there are variations in size and complexity. however, one of the disadvantages of utilizing abc is that the additional information gathering necessary to implement costing with that level of detail might be beyond the reach of some companies with resource or financial constraints. with this in mind, what kinds of industries or companies do you think would benefit most from using activity-based costing and why? in designing or modifying an accounting system to capture appropriate costs for abc, what considerations do you think would need to be made?