Sales $ 3,000,000 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 . Compute the return on investment ( ROI ) for the current year .
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 investment center .