Answered step by step
Verified Expert Solution
Question
1 Approved Answer
New England Cosmetics (NEC) produces several different perfumes and toiletries. Its men's after shave line earns a low return on assets (ROA). NEC is in
New England Cosmetics (NEC) produces several different perfumes and toiletries. Its men's after shave line earns a low return on assets (ROA). NEC is in a very competitive market and therefore cannot raise its prices. It has an asset base of $2.235 million for this line and it currently sells $3.54 million and earns $80,000 profit before tax. Assume it could double its sales with the same asset base. However, 80% of its costs are variable and will increase by 2.25 times. The rest are fixed and will not change. This action will: (pick one)
Decrease profit by 25% |
Leave the ROS unchanged |
Decrease their ROS by 25% |
Double their ROS |
Cannot be determined as we do not have the expense numbers |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started