Net Operating Sales Average Operating Assets ROI Income ? $2,500,000 $2,600,000 $2,700,000 $2,800,000 $2,900,000 $3,000,000 $475,000 2$ $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 24 24
Cost-Volume-Profit Analysis and Return on Investment
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 (ROT).
2. What happens to the company’s return on investment (ROD as sales increase? Explain.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
