Sales Controllable margin $2,320,000 1,682,000 $4,640,000 $4,640,000 2,412,800 4,256,000 Average operating assets 5,800,000 8.890.000 11,600,000 The company expects the following changes for investment centers I, II, and III in the next year: investment center I to increase sales 15%, investment center II to decrease controllable fixed costs $432,000, and investment center III to decrease average operating assets $400,000. Compute the expected return on investment (ROI) for each center. Assume investment center I has a contribution margin percentage of 73% (Round ROI to 1 decimal place, e.g. 1.5%.)
Sales Controllable margin $2,320,000 1,682,000 $4,640,000 $4,640,000 2,412,800 4,256,000 Average operating assets 5,800,000 8.890.000 11,600,000 The company expects the following changes for investment centers I, II, and III in the next year: investment center I to increase sales 15%, investment center II to decrease controllable fixed costs $432,000, and investment center III to decrease average operating assets $400,000. Compute the expected return on investment (ROI) for each center. Assume investment center I has a contribution margin percentage of 73% (Round ROI to 1 decimal place, e.g. 1.5%.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:I
II
Sales
Controllable margin
$2,320,000
$4,640,000 $4,640,000
1,682,000
2,412,800
4,256,000
Average operating assets
5,800,000
8,890,000 11,600,000
The company expects the following changes for investment centers I, II, and III in the next year: investment center I to increase sales
15%, investment center II to decrease controllable fixed costs $432,000, and investment center III to decrease average operating
assets $400,000.
Compute the expected return on investment (ROI) for each center. Assume investment center I has a contribution margin percentage
of 73%. (Round ROI to 1 decimal place, e.g. 1.5%.)
The expected return on
investment
29
%
27
%
III
37 %
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