Division A of Ram Company has $1,000,000 of sales with a CM ratio of 35% and fixed expenses of $250,000. Ram Company’s average operating assets are $500,000. Which of the following will increase the division’s ROI? Multiple Choice a)There is an increase in the division’s sales by 10% while the CM ratio, fixed expenses, and operating assets remain unchanged. b)There is an increase in the division’s operating assets by 10% while sales, the CM ratio, and fixed expenses remain unchanged. c)There is an increase in the division’s fixed expenses by 10% while sales, the CM ratio, and operating assets remain unchanged. d)There is a decrease in the division’s CM ratio by 10% while sales, fixed expenses, and operating assets remain unchanged.
Division A of Ram Company has $1,000,000 of sales with a CM ratio of 35% and fixed expenses of $250,000. Ram Company’s average operating assets are $500,000. Which of the following will increase the division’s ROI? Multiple Choice a)There is an increase in the division’s sales by 10% while the CM ratio, fixed expenses, and operating assets remain unchanged. b)There is an increase in the division’s operating assets by 10% while sales, the CM ratio, and fixed expenses remain unchanged. c)There is an increase in the division’s fixed expenses by 10% while sales, the CM ratio, and operating assets remain unchanged. d)There is a decrease in the division’s CM ratio by 10% while sales, fixed expenses, and operating assets remain unchanged.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Division A of Ram Company has $1,000,000 of sales with a CM ratio of 35% and fixed expenses of $250,000. Ram Company’s average operating assets are $500,000. Which of the following will increase the division’s ROI?
Multiple Choice
a)There is an increase in the division’s sales by 10% while the CM ratio, fixed expenses, and operating assets remain unchanged.
b)There is an increase in the division’s operating assets by 10% while sales, the CM ratio, and fixed expenses remain unchanged.
c)There is an increase in the division’s fixed expenses by 10% while sales, the CM ratio, and operating assets remain unchanged.
d)There is a decrease in the division’s CM ratio by 10% while sales, fixed expenses, and operating assets remain unchanged.
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