Calibri Light 11 B UY Av ... ab General .00 -0 A36 fx Yes, they will accept accept this project based on ROI because the actual ROI ( 26%) is greter than expected ROI. it would be be A B C D E F G 2 The president feels very strongly that Mountain Sports should expand operations to a second location. She has even found a prime location in Canmore, Alberta, One of the great things about Canmore is its proximity to the mountains, and its only about 10 minutes away from this beautiful, vibrant and internationally known Banff tourist town. Research indicates that the Canmore market is well suited to both cross-country skis and bikes that competition is fairly limited. The investment in assets (cash, inventory, equipment) required for the new location is $ 2,06,000 Minimum required return on investments 18% $ 37,080 Actual 2019 return on investment of the original location 24% S 49,007 8 Management has provided the following income statement to the bank manager the expected net Static Budget % 9 Amount 10 Sales in Units 4,048 11 Sales 5,06,000 100% 12 Less: Variable Costs: 13 Cost of Goods Sold 2,16,000 43% 14 Sales Commissions 55, 660 11% 15 Total Variable Costs 2,71 660 54% 16 Contribution Margin 2,34, 340 46% 17 Less: Fixed Costs: 18 Advertising 21,000 19 Property Taxes 9,000 = & Case Intro Group Members Q1 02 Q3 Q4 Q5 06 Group Member Evaluation + Calculation Model Automatic Workbook Statistics Type here to search OStudy Data - d... Search File Home Insert Draw Page Layout v Open in Desktop App Search D v Calibri Light 11 B By dy Av ... E ab General 00 .00 EV APV C A36 fx Yes, they will accept accept this project based on ROI because the actual ROI ( 26%) is greter than expected ROI. it would be beneficial for them to a A B C D 14 Sales Commissions 55,660 G H Ims 15 Total Variable Costs 2,71,660 54% 16 Contribution Margin 2,34,340 46% 17 Less: Fixed Costs: 18 Advertising 21,000 19 Property Taxes 9,000 20 Rent ies 42,000 21 Salaries & Wages 1,08,000 22 Total Fixed Costs 1,80,000 23 Net Operating Income 54.340 24 25 Part A: (4 marks) Calculate the following performance measurements for the proposed Canmore expansion: 26 Margin 11% 27 28 Turnover (use investment in assets in equation) 2.5 29 30 Return on Investment 26% ROI = Operating income/ investment in assets 31 32 Residual Income S 17,260 Residual income = Operating income -( Avg operating assets * Minimum % of ROI) 3B Part B: Analysis (6 marks) Explain in your own words using case data. Marks will not be awarded for textbook definitions). Apps = A Case Intro Group Members Q1 Q2 Q4 Q5 Q6 Group Member Evaluation + ? Give Fe Help Calculation Mode Automatic Workbook Statistics 3'C Cloudy Type here to search OA36 fx Yes, they will accept accept this project based on ROI because the actual ROI ( 26%) is greter than expecte A B C D E F b. What is the major weakness of using return on investment as a performance measure? Is there 38 anything you could recommend to the owners to mitigate this weakness of using ROI as a performance 39 40 c. If management is evaluated based on residual income, will the expansion into Canmore be 41 accepted? Why or why not? 42 RODE (? = & Case Intro Group Members Q1 Q2 03 Q4 05 06 Group Member Evaluation + Help Calculation Moder Automatic - Workbook Statistics