Company A reported the following results for 2021: Sales $4,000,000 Variable costs 3,200,000 Controllable fixed costs 300,000 Average operating assets 2,500,000 Management is considering the following independent alternative courses of action in 2022 in order to maximize the return on investment for the division. Reduce controllable fixed costs by 10% with no change in sales or variable Reduce average operating assets by 10% with no change in controllable Increase sales $500,000 with no change in the contribution margin Instructions Compute the return on investment for 2021 Compute the expected return on investment for each of the alternative courses of action
Company A reported the following results for 2021: Sales $4,000,000 Variable costs 3,200,000 Controllable fixed costs 300,000 Average operating assets 2,500,000 Management is considering the following independent alternative courses of action in 2022 in order to maximize the return on investment for the division. Reduce controllable fixed costs by 10% with no change in sales or variable Reduce average operating assets by 10% with no change in controllable Increase sales $500,000 with no change in the contribution margin Instructions Compute the return on investment for 2021 Compute the expected return on investment for each of the alternative courses of action
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Company A reported the following results for 2021:
|
Sales |
$4,000,000 |
|
Variable costs |
3,200,000 |
|
Controllable fixed costs |
300,000 |
|
Average operating assets |
2,500,000 |
Management is considering the following independent alternative courses of action in 2022 in order to maximize the
- Reduce controllable fixed costs by 10% with no change in sales or variable
- Reduce average operating assets by 10% with no change in controllable
- Increase sales $500,000 with no change in the contribution margin
Instructions
- Compute the return on investment for 2021
- Compute the expected return on investment for each of the alternative courses of action
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