Posters.com is a small Internet retailer of high-quality posters. The company ha
ID: 2446486 • Letter: P
Question
Posters.com is a small Internet retailer of high-quality posters. The company has $770,000 in operating assets and fixed expenses of $152,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5,300,000 per year. The company’s contribution margin ratio is 9%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 9 cents.
Complete the following table showing the relation between sales and return on investment (ROI). (Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)
What happens to the company’s return on investment (ROI) as sales increase?
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WorksheetDifficulty: 1 EasyLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.
Posters.com is a small Internet retailer of high-quality posters. The company has $770,000 in operating assets and fixed expenses of $152,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5,300,000 per year. The company’s contribution margin ratio is 9%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 9 cents.
Explanation / Answer
1)
2)
Company's Return on Investment will increase as Sales increases as Assets + Fixed Expenses Turnover Ratio is less than 1 and there is a positive net income.
SI No. Particulars Amount in $ 1 Net Assets 770,000.00 2 Fixed Expenses per annum 152,000.00 3 Sales perannum 5,300,000.00 4 Contribution 9% 5 Contribution in $ 477,000.00 6 Less: Fixed Expenses (152,000.00) 7 Net Income 325,000.00 ROI (7 / 1) 42.21%Related Questions
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