EXERCISE 9-10 Cost-Volume-Profit Analysis and Return on Investment (ROI) [LO9-1] Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operating assets and fixed expenses of $150,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $3,000,000 per year. The company's contribution margin ratio is 25%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 25 cents. Required: 1. Complete the following table showing the relation between sales and return on investment (ROI). Net Operating Income Sales Average Operating Assets ROI $2,500,000 $475,000 $1,000,000 $2,600,000 $ ? $1,000,000 $2,700,000 $ ? $1,000,000 $2,800,000 $ ? $1,000,000 $2,900,000 $ ? $3,000,000 $ ? $1,000,000 $1,000,000 222222 ? ? ? ? ? ? 2. What happens to the company's return on investment (ROI) as sales increase? Explain.
EXERCISE 9-10 Cost-Volume-Profit Analysis and Return on Investment (ROI) [LO9-1] Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operating assets and fixed expenses of $150,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $3,000,000 per year. The company's contribution margin ratio is 25%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 25 cents. Required: 1. Complete the following table showing the relation between sales and return on investment (ROI). Net Operating Income Sales Average Operating Assets ROI $2,500,000 $475,000 $1,000,000 $2,600,000 $ ? $1,000,000 $2,700,000 $ ? $1,000,000 $2,800,000 $ ? $1,000,000 $2,900,000 $ ? $3,000,000 $ ? $1,000,000 $1,000,000 222222 ? ? ? ? ? ? 2. What happens to the company's return on investment (ROI) as sales increase? Explain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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![EXERCISE 9-10 Cost-Volume-Profit Analysis and Return on Investment (ROI) [LO9-1]
Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operating assets
and fixed expenses of $150,000 per year. With this level of operating assets and fixed expenses, the company
can support sales of up to $3,000,000 per year. The company's contribution margin ratio is 25%, which means
that an additional dollar of sales results in additional contribution margin, and net operating income, of 25 cents.
Required:
1. Complete the following table showing the relation between sales and return on investment (ROI).
Net Operating
Income
Sales
Average
Operating Assets
ROI
$2,500,000
$475,000
$1,000,000
$2,600,000
$ ?
$1,000,000
$2,700,000
$ ?
$1,000,000
$2,800,000
$ ?
$1,000,000
$2,900,000
$
?
$3,000,000
$
?
$1,000,000
$1,000,000
222222
?
?
?
?
?
?
2. What happens to the company's return on investment (ROI) as sales increase? Explain.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd44284f0-3b6c-4324-8922-004022f1f551%2F87a1181b-bc17-41ee-8d85-b4bcbfbd5248%2Fd0oel1q_processed.png&w=3840&q=75)
Transcribed Image Text:EXERCISE 9-10 Cost-Volume-Profit Analysis and Return on Investment (ROI) [LO9-1]
Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operating assets
and fixed expenses of $150,000 per year. With this level of operating assets and fixed expenses, the company
can support sales of up to $3,000,000 per year. The company's contribution margin ratio is 25%, which means
that an additional dollar of sales results in additional contribution margin, and net operating income, of 25 cents.
Required:
1. Complete the following table showing the relation between sales and return on investment (ROI).
Net Operating
Income
Sales
Average
Operating Assets
ROI
$2,500,000
$475,000
$1,000,000
$2,600,000
$ ?
$1,000,000
$2,700,000
$ ?
$1,000,000
$2,800,000
$ ?
$1,000,000
$2,900,000
$
?
$3,000,000
$
?
$1,000,000
$1,000,000
222222
?
?
?
?
?
?
2. What happens to the company's return on investment (ROI) as sales increase? Explain.
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Step 1: Introduce to ROI
VIEWStep 2: Working for ROI at sales of $2,500,000
VIEWStep 3: Working for operating income and ROI at sales of $2,600,000
VIEWStep 4: Working for operating income and ROI at sales of $2,700,000
VIEWStep 5: Working for operating income and ROI at sales of $2,800,000
VIEWStep 6: Working for operating income and ROI at sales of $2,900,000
VIEWStep 7: Working for operating income and ROI at sales of $3,000,000
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