Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pecs Alley is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based

Pecs Alley is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The Springfield Club reported the following results for the past year:

Sales $890,000
Net operating income $19,000
Average operating assets $107,000

The following questions are to be considered independently. Carry out all computations to two decimal places.

Requirement 1:
Compute the club's return on investment (ROI). (Round interim calculations to 2 decimal places. Round your answer to the nearest whole percentage. Omit the "%" sign in your response.)
Return on investment %
Requirement 2:

Assume that the manager of the club is able to increase sales by $72,000 and that, as a result, net operating income increases by $4,000. Further assume that this is possible without any increase in operating assets. What would be the club%u2019s return on investment (ROI)? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Return on Investment %
Requirement 3:

Assume that the manager of the club is able to reduce expenses by $3,200 without any change in sales or operating assets. What would be the club%u2019s return on investment (ROI)? (Round interim calculations to 2 decimal places. Round your answer to the nearest whole percentage. Omit the "%" sign in your response.)

Return on investment %
Requirement 4:

Assume that the manager of the club is able to reduce operating assets by $24,000 without any change in sales or net operating income. What would be the club%u2019s return on investment (ROI)? (Round interim calculations to 2 decimal places. Round your answer to the nearest whole percentage. Omit the "%" sign in your response.)

Return on investment %

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

Custom Edition For University Of Central Florida From Managerial Accounting

Authors: Karen Wilken Braun, Wendy Tietz

3rd Edition

1269451839, 978-1269451833

More Books

Students also viewed these Accounting questions