ROI and RI. (D. Kleespie, adapted) The Outdoor Sports Company produces a wide variety of outdoor sports equipment. Its newest division, Golf Technology, manufactures and sells a single product: AccuDriver, a golf club that uses global positioning satellite technology to improve the accuracy of golfers’ shots. The demand for AccuDriver is relatively insensitive to price changes. The following data are available for Golf Technology, which is an investment center for Outdoor Sports:

1. Compute Golf Technology’s ROI if the selling price of AccuDrivers is $720 per club.

2. If management requires an ROI of at least 25% from the division, what is the minimum selling price that the Golf Technology Division should charge per AccuDriver club?

3. Assume that Outdoor Sports judges the performance of its investment centers on the basis of RI rather than ROI. What is the minimum selling price that Golf Technology should charge per AccuDriver if the company’s required rate of return is 20%?

Transcribed Image Text:

$30,000,000 Total annual fixed Costs Variable cost per AccuDriver 500 Number of AccuDrivers sold each year 150,000 Average operating assets invested in the division $48,000,000