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Exercise 25-17 The South Division of Sunland Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 1. Increase sales by $300.000 with no change in the contribution margin percentage. 2. Reduce variable costs by $160,000. 3. Reduce average operating assets by 3%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on Investment Action I Action 2 (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on investment Action 3 96 % $3,000,000 2,010,000 605,000 5,000,000 % %

Exercise 25-17 The South Division of Sunland Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 1. Increase sales by $300.000 with no change in the contribution margin percentage. 2. Reduce variable costs by $160,000. 3. Reduce average operating assets by 3%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on Investment Action I Action 2 (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on investment Action 3 96 % $3,000,000 2,010,000 605,000 5,000,000 % %

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 25-17 The South Division of Sunland Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets Return on Investment Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 1. Increase sales by $300,000 with no change in the contribution margin percentage. 2. Reduce variable costs by $160,000. 3. Reduce average operating assets by 3%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Action 1 Action 2 (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on investment Action 3 96 % $3,000,000 2,010,000 % 96 605,000 5,000,000
Transcribed Image Text:Exercise 25-17 The South Division of Sunland Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets Return on Investment Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 1. Increase sales by $300,000 with no change in the contribution margin percentage. 2. Reduce variable costs by $160,000. 3. Reduce average operating assets by 3%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Action 1 Action 2 (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on investment Action 3 96 % $3,000,000 2,010,000 % 96 605,000 5,000,000
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