The South Division of Novak Company reported the following data for the current year.Sales $3,050,000Variable costs 2,013,000Controllable fixed costs 610,000Average operating assets 5,000,000Top 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 $150,000.3. Reduce average operating assets by 4.00%.(a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.)Return on Investment enter the return on investment in percentages %(b) Using the ROI equation, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on investmentAction 1 enter percentages %Action 2 enter percentages %Action 3 enter percentages %

Return on Investment (ROI): It establishes the relationship between the net income and the assets or…

Answered: %. (a) Compute the return on…

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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The South Division of Novak Company reported the following data for the current year.

Sales		$3,050,000
Variable costs		2,013,000
Controllable fixed costs		610,000
Average operating assets		5,000,000

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 $150,000.
3.		Reduce average operating assets by 4.00%.

(a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.)

Return on Investment

enter the return on investment in percentages

(b) Using the ROI equation, 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 1	enter percentages	%
Action 2	enter percentages	%
Action 3	enter percentages	%

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