The service division of Raney Industries reported the following results for 2013.

Sales $500,000 Variable costs 300,000 Controllable fixed costs 75,000 Average operating assets 625,000 Management is considering the following independent courses of action in 2014 in order to maximize the return on investment for this division.

1 Reduce average operating assets by $125,000, with no change in controllable margin.

2 Increase sales $100,000, with no change in the contribution margin percentage.

(a) Compute the controllable margin and the return on investment for 2013.

(b) Compute the controllable margin and the expected return on investment for each proposed alternative.

AppendixLO1