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The South Division of Crane Company reported the following data for the current year. Sales $2,950,000 Variable costs 1,947,000 Controllable fixed costs 595,000 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. Reduce variable costs by $155,000. Reduce average operating assets by 4%. 2. 3. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on Investment % (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Action 1 Action 2 Action 3 Return on investment % % %

The South Division of Crane Company reported the following data for the current year. Sales $2,950,000 Variable costs 1,947,000 Controllable fixed costs 595,000 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. Reduce variable costs by $155,000. Reduce average operating assets by 4%. 2. 3. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on Investment % (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Action 1 Action 2 Action 3 Return on investment % % %

FINANCIAL ACCOUNTING
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 Crane Company reported the following data for the current year. $2,950,000 1,947,000 595,000 5,000,000 Sales Variable costs Controllable fixed costs Average operating assets 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. 2. 3. Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $155,000. Reduce average operating assets by 4%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on Investment (b) Using the ROIl formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Action 1 Action 2 Action 3 Return on investment % % %
Transcribed Image Text:The South Division of Crane Company reported the following data for the current year. $2,950,000 1,947,000 595,000 5,000,000 Sales Variable costs Controllable fixed costs Average operating assets 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. 2. 3. Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $155,000. Reduce average operating assets by 4%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on Investment (b) Using the ROIl formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Action 1 Action 2 Action 3 Return on investment % % %
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