Question
The South Division of Wiig Company reported the following data for the current year. Sales $2,900,000 Variable costs 1,943,000 Controllable fixed costs 590,000 Average operating
The South Division of Wiig Company reported the following data for the current year.
| Sales | $2,900,000 |
| Variable costs | 1,943,000 |
| Controllable fixed costs | 590,000 |
| Average operating assets | 4,900,000 |
Top management is unhappy with the investment center's 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 $319,000with no change in the contribution margin percentage. |
| 2. | Reduce variable costs by $150,000. |
| 3. | Reduce average operating assets by3%. |
(a)Compute the return on investment (ROI) for the current year.(Round ROI to 1 decimal place, e.g. 1.5.)
| Return on Investment | % |
(b)Using the ROI formula, compute the ROI under each of the proposed courses of action.(Round ROI to 1 decimal place, e.g. 1.5.)
| Return on investment | |
| Action1 | % |
| Action2 | % |
| Action3 | % |
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Advanced Accounting
Authors: Susan S. Hamlen
3rd Edition
1618531514, 978-1618531513
