1. The Gustavo Industries in So Paulo, Brazil, reported the following results for 2020 (currency in Brazilian real, R$):

Sales R$ 400,000,000

Variable costs 320,000,000

Controllable fixed costs 40,800,000

Average operating assets 280,000,000

Gustavos Management is considering the following independent courses of action in 2021 in order to maximize the return on investment for this division:

• Option1: Reduce average operating assets by R$ 80,000,000 with no change in controllable margin.
• Option2: Increase sales R$ 80,000,000 with no change in the contribution margin percentage.

1. Compute the controllable margin and the return on investment for 2020.
2. Compute the controllable margin and the expected return on investment for each proposed option.