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Variable costs
1,950,000
Controllable fixed costs
600,000
Average operating assets
5,000,000
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 $300,000 with no change in the contribution
margin percentage.
2.

Reduce variable costs by $150,000.

3.

Reduce average operating assets by 4%.

Instructions
1.
year.

Compute the return on investment (ROI) for the current

2.
Using the ROI formula, compute the ROI under each of
the proposed courses of action. (Round to one decimal.)
Prepare a responsibility report for an inve stment center.

P10-5A