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The South Division of Wiig Company reported the following data for the current yea Sales Variable costs Controllable fixed costs Average operating assets $2,950,000 1,917,500 595,000 5,000,000

The South Division of Wiig Company reported the following data for the current yea Sales Variable costs Controllable fixed costs Average operating assets $2,950,000 1,917,500 595,000 5,000,000

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 Wiig Company reported the following data for the current year. 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. 2. 1. Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $150,000. Reduce average operating assets by 4%. 3. Return on Investment $2,950,000 (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) 1,917,500 595,000 5,000,000 Action 1 Action 2 (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 3 Return on investment % % % %
Transcribed Image Text:The South Division of Wiig Company reported the following data for the current year. 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. 2. 1. Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $150,000. Reduce average operating assets by 4%. 3. Return on Investment $2,950,000 (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) 1,917,500 595,000 5,000,000 Action 1 Action 2 (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 3 Return on investment % % % %
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