Exercise 10-17 (Video)

The South Division of Wiig Company reported the following data for the current year.

Sales		$3,000,000
Variable costs		1,980,000
Controllable fixed costs		595,000
Average operating assets		5,000,000

Top management is unhappy with the investment centers return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action.

1.		Increase sales by $300,000 with no change in the contribution margin percentage.
2.		Reduce variable costs by $150,000.
3.		Reduce average operating assets by 3%.

(a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.)

Return on Investment

%

(b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.)

		Return on investment
Action 1			%
Action 2			%
Action 3			%