Question
The Burger Division of Good Meat Company reported the following results for 2020: Sales $800,000 Variable costs 420,000 Controllable fixed costs 100,000 Average operating assets
The Burger Division of Good Meat Company reported the following results for 2020:
Sales $800,000
Variable costs 420,000
Controllable fixed costs 100,000
Average operating assets 4,000,000
Management is considering the following independent alternative courses of action in 2021
in order to maximize the return on investment for the division.
1. Reduce controllable fixed costs by 50% with no change in sales or variable costs.
2. Reduce average operating assets by 30% with no change in controllable margin.
3. Increase sales $200,000 with no change in the contribution margin percentage.
Required
a) Calculate the return on investment for 2020
b) Calculate the expected return on investment for each of the alternative courses of
action
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