The manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past three years. Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%. The company's minimum required rate of return is 8%. If managerial performance is evaluated using return on investment (ROI), he will: Reject the opportunity Accept the Opportunity

The manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past three years. Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%. The company's minimum required rate of return is 8%. If managerial performance is evaluated using return on investment (ROI), he will: Reject the opportunity Accept the Opportunity

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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“I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company’s Office Products Division for this year are given below: Sales $ 22,835,000 Variable expenses 14,297,200 Contribution margin 8,537,800 Fixed expenses 6,190,000 Net operating income $ 2,347,800 Divisional average operating assets $ 4,000,000 The company had an overall return on investment (ROI) of 17.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product line that…
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Flamengo Co is a sporting goods manufacturing. Its basketball division had an ROI of 15% in 2020. Which of the following is not an advantage of ROI? O It discourages excessive investment in operating assets. O It encourages cost efficiency. O It encourages managers of departments with high ROIS to invest in average ROI projects. OIt encourages managers to pay careful attention to the relationships among sales, expenses, and investment.
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