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The Scarf division of Wintertime Inc. reported the following results from last years operations: Sales $1,000,000 Variable expenses 700,000 Contribution margin 300,000 Fixed expenses 200,000

The Scarf division of Wintertime Inc. reported the following results from last years operations:

Sales

$1,000,000

Variable expenses

700,000

Contribution margin

300,000

Fixed expenses

200,000

Net operating income

$100,000

Average operating assets

$1,000,000

At the beginning of the year the Scarf division had a $200,000 investment opportunity with the following characteristics:

Sales

$300,000

Contribution margin ratio

40%

of sales

Fixed expenses

$60,000

If the division pursues the investment opportunity and otherwise performs the same as last year, the combined (new) ROI for the division will be closest to:

  • 20.00%

  • 18.33%

  • 13.33%

  • 9.17%

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