ABC Ltd is a national chain of dental clinics. Each clinics manager has the authority to make investments as needed and is evaluated based largely on ROI. ABCs Oshawa location reported the following results for the past year:

Sales

$850,000

Variable costs

612,000

Controllable fixed costs

206,500

Average operating assets

350,000

Instructions

(a) Assume that the manager of the Oshawa clinic is able to reduce both variable and controllable fixed costs by 15% without any change in sales or operating assets. Compute the base-line and the adjusted ROIs. What should the manager do?