Information pertaining to Piney River Division of MO Corporation for 2004: Revenues $950,000 Variable costs 575,000 Traceable fixed costs 336,500 Average invested capital 350,000 Imputed interest rate 10%

ROI= operating income(38,500)/ total assets(350,000)= 11%

ROI= 11%

Using the information above, assume there is a 1% increase in sales volume. What would be the new ROI(return on investment)?

can someone help me with this question, please? The answer is already given but I don't know how it got that? the solution is shown below. The only part I don't understand is WHY are we multiplying 101% by $575,000= 580,750? On the question is says a 101% increase in sales volume but not variable cost?

Can someone help me with this question, please? I understand why the revenue is multiplied by 101% but not variable costs because it says a 1% increase in sales volume NOT variable costs.

book solution:

950,000 x 101%= $959,500

575,000 x101%= (580,750) <--- deduct

( 336,500) <---- deduct

operating income= 42,500

NEW ROI= 42,500/ 350,000 = 12.1%(rounded)