Answered step by step
Verified Expert Solution
Link Copied!

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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting An Introduction to Concepts, Methods and Uses

Authors: Roman L. Weil, Katherine Schipper, Jennifer Francis

14th edition

978-1111823450, 1-133-36617-1 , 1111823456, 978-1-133-3661, 978-1133591023

Students also viewed these Accounting questions