Sales Variable costs Controllable fixed costs Average operating assets 1 2 3 Top management is unhappy with the investment center's return on investment (ROG 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 $2,950,000 (a) Compute the return 1,976,500 600,000 5.000.000 Increase sales by $300,000 with no change in the contribution margin percentage Reduce variable costs by $155.000 Reduce average operating sets by 300% Return on Investment investment (RO0 for the current year (Round ROI o decimal places, s 1.57%) IN Using the ROI equation compute the ROI under each of the proposed courses of action (Round ROI to 2 decimal places, eg 1.57%) Return on investment

Accounting - ROI

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QUESTION 29   Top management is trying to determine which would be the best choice of the following   investment opportunities: Data of investment choices: 3 Sales $6,000,000 Operating income      300,000 Average operating assets   3,000,000   Required:  Compute the Return on investment       12%     11%     10%     8%

Coronado Division has the following data: Sales Variable expenses Fixed expenses $509000 231000 286000 The fixed costs are not avoidable and must be allocated to profitable divisions if the segment is eliminated. What will be the incremental effect on net income if Coronado Division is eliminated? O $223000 increase O $278000 decrease O $286000 decrease Cannot be determined from the data provided

A2

QUESTION 26   Top management is trying to determine which would be the best choice of the following   investment opportunities: Data of investment choices: 1 Sales $10,000,000 Operating income        200,000 Average operating assets     2,000,000   Required:  Compute the Residual Income assuming a minimum required rate of return of 8%.       $40,000     $0     $50,000     $(40,000)

QUESTION 30   Management is trying to determine which would be the best choice of the following   investment opportunities: Data of investment choices: 3 Sales $6,000,000 Operating income      300,000 Average operating assets   3,000,000   Required:  Compute the Residual Income assuming a minimum required rate of return of 8%.       $66,000     $75,000     $60,000     $70,000

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