Question 18 The service division of Raney Industries reported the following resu

Question

Question 18 The service division of Raney Industries reported the following results for 2017. Sales $519,200 Variable costs 311,520 Controllable fixed costs 96,800 Average operating assets 679,000 Management is considering the following independent courses of action in 2018 in order to maximize the return on investment for this division. 1. Reduce average operating assets by $125,500, with no change in controllable margin. 2. Increase sales $109,600, with no change in the contribution margin percentage. Compute the controllable margin and the return on investment for 2017. (Round ROI to 1 decimal place, e.g. 1.5.) Controllable margin $ Return on investment for 2017 % Compute the controllable margin and the expected return on investment for each proposed alternative. (Round ROI to 1 decimal place, e.g. 1.5.) Alternative 1 Alternative 2 The controllable margin $ $ The expected return on investment % %

Explanation / Answer

Controllable margin:

Alternative 1:-

=519200-311520-96800

=110880

Alternative 2 :-

Contribution margin in 2017

=(519200-311520)/519200

=.4

Controllable margin in 2018

=110880+(109600×.4)

=154720

Return on investment

=controllable margin/average operating assets

ROI in ;

Alternative 1:-

=110880/(679000-125500)

=20.03%or 20%

Alternative 2:-

=154720/679000

=22.8%

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.