Albany Company calculated its return on investment as 11 percent. Sales are now

Question

Albany Company calculated its return on investment as 11 percent. Sales are now $276,000, and the amount of total

operating assets is $445,000.

Required a. If expenses are reduced by $27,600 and sales remain unchanged, what return on investment will result? (Round your answer to 2 decimal places. (i.e., .2345 should be entered as 23.45)) Return on investment b. If both sales and expenses cannot be changed, what change in the amount of operating assets is required to achieve the same result? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) Operating assets must be

Explanation / Answer

Total Operating Assets        445,000.00 Return on Investment 11% Return = 445,000*11%          48,950.00 a) Return          48,950.00 Reduction in expenses          27,600.00 Total Return          76,550.00 Return on Investment = 76,550/445,000 Return on Investment = 17.20% b) 17.20% = 48,950/Investment Investment = 284,593.02 Change in operating Assets = 284,593.02 - 445,000 Decrease in operating Assets = 160,406.98

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