Question
For its three investment centers, Martinez Company accumulates the following data: I II III Sales $1,920,000 $3,840,000 $3,840,000 Controllable margin 1,392,000 1,996,800 3,594,240 Average operating
For its three investment centers, Martinez Company accumulates the following data:
| I | II | III | ||||
|---|---|---|---|---|---|---|
| Sales | $1,920,000 | $3,840,000 | $3,840,000 | |||
| Controllable margin | 1,392,000 | 1,996,800 | 3,594,240 | |||
| Average operating assets | 4,800,000 | 7,865,000 | 9,600,000 |
The company expects the following changes for investment centers I, II, and III in the next year: investment center I to increase sales 15%, investment center II to decrease controllable fixed costs $520,000, and investment center III to decrease average operating assets $384,000. Compute the expected return on investment (ROI) for each center. Assume investment center I has a contribution margin percentage of 73%.
What is the expected ROI for investment center I?
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Financial Accounting in an Economic Context
Authors: Jamie Pratt
9th edition
9781118803035, 1118582551, 1118803035, 978-1118582558
