1. Last year sales were $300,000, net operating income was $75,000, and average operating assets were $500,000. If sales next year remain the same as last year and expenses and average operating assets are reduced by 5%, what will be the return on investment next year?

   a		12.2%
   b		18.2%
   c		20.2%
   d		25.2%

2. A company analyzed two products and computed the following information:

   	Sales	Capital Turnover	ROI
   High Power	5%	2.0	10.0%
   Low Power	5%	2.5	12.5%

   All of the following statements are true EXCEPT:

   a		High Power uses its assets less efficiently than Low Power.
   b		both divisions earn the same amount of profit per sales dollar.
   c		Low Power division uses its assets more efficiently than High Power.
   d		High Power can increase its ROI by increasing its inventory levels

3. SPKY has three product lines: silver, gold, and platinum. All three products have a positive contribution margin, but the gold line has an operating loss. Management is considering eliminating the product line because all of golds variable costs can be eliminated as well. If all other factors remain the same and management eliminates the product line, what will happen to operating income?

   a		Operating income will increase.
   b		Operating income will decrease.
   c		Operating income will not change.
   d		Not enough information is present to make that determination.