The service division of Retro Industries reported the following results for 2010. Sales ...........$500,000 Variable costs .......300,000

Question:

The service division of Retro Industries reported the following results for 2010.
Sales ...........$500,000
Variable costs .......300,000
Controllable fixed costs .....75,000
Average operating assets ..450,000
Management is considering the following independent courses of action in 2011 in order to maximize the return on investment for this division.
1. Reduce average operating assets by $50,000, with no change in controllable margin.
2. Increase sales $100,000, with no change in the percentage.
(a) Compute the controllable margin and the return on investment for 2010.
(b) Compute the controllable margin and the on investment for each proposed alternative.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...