The South Division of Wig Company reported the following data for the current ye

ID: 2515509 • Letter: T

Question

The South Division of Wig Company reported the following data for the current year $3,079,000 2,032.140 590,600 5,009,800 Variable costs Controllable fixed costs Average operating assets Top m year. The manager believes it is feasible to consider the fallowing independent courses of action 1. on investment (ROt). It asks the manager of the South Division to submit plans to improve ROI in the next Increase sales by $321,000 with no change in the contribution margin percentage. Reduce variable costs by $154,500. Reduce average operating assets by 4%. 2. 3. (o) compute the return on investmert Rop forthe curent year. (oumd ROT to 1 decimat place, e 13.J Return on Investment (b) Using the ROt formula, compute the ROt under each of the proposed courses of action. (Round ROI to 1 decimal place, e.g. 1.5) Action 1 Action 2 Action 3 TOSHIBA BACK 8 9 5 6

Explanation / Answer

Solution - Calculation of Return on Investment

$2032140

($2032140/$3079000*100)

$2244000

($3400000*66%)

9.11%

($456260/$5009800)*100

11.29%

($565400/$5009800)*100

12.19%

($610760/$5009800)*100

9.49%

($456260/$4809408)*100

Particulars Current Year Increase in sales by $321000 Reduce Variable cost by $154500 Reduce Average Operating Assets by 4% Sales $3079000 $3400000 $3079000 $3079000 Less - Variable cost