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iPad 9:23 AM 10% ( D + e Chegg Study l Guided Soluti ×/ledugen.wileyplus.com/edu × Dedugen.wileyplus.com/edugen/lti/main.uni y mn eoBusines Decision Making, Se Kimmel, Accounting: Tools for Business Decision Making, 5e Help I System Announcements (2 Unread) CALCULATOR PRINTER VERSION BACK NEX Exercise 22-17 The West Division of Nieto Company reported the following data for the current year Sales Variable costs Controllable fixed costs Average operating assets $2,988,200 1,981,800 590,490 4,927,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the West 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 1. Increse sales by $319,750 with no change in the contribution margin percentage 2. Reduce variable costs by $154,310 3. Reduce average operating assets by 5% Compute the return on investment (ROI) for the current year. (Round ROI to 1 decimal place, e.g. 1.5%.) Return on Investment LINK TO TEXT Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 1 decimal place e.g. 1.5%.) Return on investment Action 1 Action 2 Action 3 Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor Question Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWERExplanation / Answer
Present return on investment Sales - a 29,88,200 Variable cost - b 19,81,800 Fixed Cost - c 5,90,490 Gross Return - d = a-b-c 4,15,910 ROI = Gross Return / Operating Assets $415,910/4,927,000 = 8.44% Return on investment if Sales increased Sales - a 2,988,200+319,750 = 3,307,950 Variable cost - b (3,307,950*(1,981,800/2,988,200)) = 2,193,861 Fixed Cost - c 5,90,490 Gross Return - d = a-b-c 5,23,599 ROI = Gross Return / Operating Assets $523,559/4,927,000 = 10.63% Return on investment if Variable cost reduced Sales - a 29,88,200 Variable cost - b 1,981,800-154,310 = 1,827,490 Fixed Cost - c 5,90,490 Gross Return - d = a-b-c 5,70,220 ROI = Gross Return / Operating Assets $570,220/4,927,000 = 11.57% return on investment if average operating assets reduced by 5% Sales - a 29,88,200 Variable cost - b 19,81,800 Fixed Cost - c 5,90,490 Gross Return - d = a-b-c 4,15,910 ROI = Gross Return / Operating Assets $415,910/(4,927,000-(4,927,000*5%)) = 8.89%
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