Chapter 10, Problem 10E

Cost-Volume-Profit Analysis and Return on Investment (ROI)
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 shelving the relation between sales and return on investment (ROI).

  2.  What happens to the company's return on investment (ROI) as sales increase? Explain.