Exercise 9-10 Cost-Volume-Profit Analysis and Return on Investment (ROI) [LO9-1]

Posters.com is a small Internet retailer of high-quality posters. The company has $880,000 in operating assets and fixed expenses of $161,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $4,900,000 per year. The companys contribution margin ratio is 10%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 10 cents.

Required:
1.	Complete the following table showing the relation between sales and return on investment (ROI). (Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

Sales net operating average operating ROI

income assets %

4400000 279000 880000

4500000 880000

4600000 880000

4700000 880000

4800000 880000

4900000 880000

2.

What happens to the companys return on investment (ROI) as sales increase?

	Increases
	Decreases