The Green Division of Frizell Company reported the following data for the curren

Question

The Green Division of Frizell Company reported the following data for the current year . Top management is unhappy with the investment center's return on investment (ROI). it asks the manager of the Green 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. Increase sales by $328,000 with no change in the contribution margin percentage. Reduce variable costs by $104,600. Reduce average operating assets by 4%. Compute the return on investment (ROI) for the current year . (Round answer to 1 decimal place, i. e. 9.5.) Using the ROI formula, compute the ROI under each of the proposed courses of act ion. (Round computations for contribution margin percentage to 0 decimal places, i.e. 25 and final answers to one decimal place, i.e. 15.5.)

Explanation / Answer

operating profit=3110400-1963500-601800=545100 ROI for the current year=operating income/operating assets 545100/5243600*100=10.4% ROI for three proposed actions (1) profit=3438400-2170318-601800=666282 666282/5243600*100=12.7% (2)operating profit=3110400-1858900-601800=649700 649700/5243600*100=12.4% (3)operating profit=3110400-1963500-601800=545100 operating assets=5243600-4%=5033856 ROI=545100/5033856*100=10.8%

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