The formula for return on income (ROI) is: net operating income / average operating assets.

For the following situations, will the effect on ROI be an improvement in ROI or a decline in ROI

a Increase in sales

b Increase in operating assets

c Reduction in expenses

For each situation, calculate the new ROI (use any amounts of increase or reduction in each situation). You can use the following as your original ROI:

Average operating assets: $100,000

Net operating income: $20,000

If there is no constrained resources and you were able to sell as many units as you could produce, which product would you choose to produce? Explain your answer.

Desk A Desk B

Selling price per unit $ 75 $ 60

Variable cost per unit $ 50 $ 40

Now, assume that each desk must be painted and there is a limited number of available hours in the painting department. The following is the amount of time required to paint each desk.

Desk A Desk B

Painting Dept. time required (minutes): 20 15

If you could sell as many units as you could produce, which product would you chose to produce? Explain your answer.