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Posters.com is a small Internet retailer of high-quality posters. The company has $890,000 in operating assets and fixed expenses of $154,000 per year. With this
Posters.com is a small Internet retailer of high-quality posters. The company has $890,000 in operating assets and fixed expenses of $154,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5,000,000 per year. The company's contribution margin ratio is 10%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 10 cents. Required: 1. Complete the following table showing the relation between sales and return on investment (ROI) (rounded). (Round your percentage answers to 2 decimal places.) Sales Sales Net Operating Net Operating Average ROI Operating % Income $ 296,000 4.500.000 4,600,000 4,700,000 Assets $ 890,000 $ 890,000 $ 890,000 $ 890,000 $ 890,000 $ 890,000 4,800,000 4,900,000 5,000,000 2. What happens to the company's return on investment (ROI) as sales increase? Increases O Decreases (The following information applies to the questions displayed below.) Fitness Fanatics 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 company's Springfield Club reported the following results for the past year: Sales Net operating income Average operating assets $ $ $ 900,000 31,500 100,000 walue: 10.00 points Required information 2. Assume that the manager of the club is able to increase sales by $90,000 and that, as a result, net operating income increases by $8,100. Further assume that this is possible without any increase in operating assets. What would be the club's return on investment (ROI)? (Round your answers to 2 decimal places.) Margin Turnover ROI times 3. Assume that the manager of the club is able to reduce expenses by $3,600 without any change in sales or operating assets. What would be the club's return on investment (ROI)? (Round your answers to 2 decimal places.) Margin Turnover ROI times 4. Assume that the manager of the club is able to reduce operating assets by $40,000 without any change in sales or net operating income. What would be the club's return on investment (ROI)? (Round your answers to 2 decimal places.) Margin Turnover ROI times
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