Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operatingassets and fixed expenses of $150,000 per year. With this level of operating assets and fixed expenses, thecompany 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 operatingincome, of 25 cents.Required:1. Complete the following table showing the relation between sales and return on investment (ROI).Net Operating AverageSales Income 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 $ ? $1,000,000 ?$3,000,000 $ ? $1,000,000 ?2. What happens to the company’s return on investment (ROI) as sales increase? Explain.
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
Net Operating Average
Sales Income 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 $ ? $1,000,000 ?
$3,000,000 $ ? $1,000,000 ?
2. What happens to the company’s return on investment (ROI) as sales increase? Explain.
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