LA Fitness is a regional chain of health clubs. The manager of the clubs, who have the authority to make investments as needed are evaluated based on ROI. The company's NW DC club reported the follwoing results for the past year: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $12,500,000 2,380,000 3,220,000 2,716,000 $504,000 $7,000,000 At the beginning of this year, the manager has a $700,000 investment opportunity with the following characteristics: Sales Contribution margin ratio Fixed expenses $660,000 50% of sales $246,400 (Show your work) 1. What was last year's return on investment (ROI) for the club? (Round to the nearest 0.1%.) 2. What is the ROI for the new investment opportunity by itself? 3. If the club pursues the investment opportunity and otherwise performs the same as last year, what will be the overall ROI be this year? (Round to the nearest 0.1%.)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Step by step
Solved in 4 steps