Question
The South Division of Marigold Company reported the following data for the current year. Sales $3,000,000 Variable costs 2,010,000 Controllable fixed costs 605,000 Average operating
The South Division of Marigold Company reported the following data for the current year.
| Sales | $3,000,000 | |
| Variable costs | 2,010,000 | |
| Controllable fixed costs | 605,000 | |
| Average operating assets | 5,000,000 |
Top management is unhappy with the investment centers return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action.
| 1. | Increase sales by $300,000 with no change in the contribution margin percentage. | |
| 2. | Reduce variable costs by $160,000. | |
| 3. | Reduce average operating assets by 3.00%. |
(a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.)
| Return on Investment | enter the return on investment in percentages | % |
(b) Using the ROI equation, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.)
| Return on investment | |||
|---|---|---|---|
| Action 1 | enter percentages | % | |
| Action 2 | enter percentages | % | |
| Action 3 | enter percentages | % | |
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Fundamental accounting principle
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
21st edition
1259119831, 9781259311703, 978-1259119835, 1259311708, 978-0078025587
