LCULATOR Sales Variable costs Controllable fixed costs Average operating assets

Question

LCULATOR Sales Variable costs Controllable fixed costs Average operating assets $570,800 342,480 61,100 636,400 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 $123,600, with no change in controllable margin 2. Increase sales $107,500, 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 LINK TO TEXT 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

1 Controllable margin 167220 =570800-342480-61100 Return on investment for 2017 26.3% =167220/636400 2 Alternative 1: Controllable margin 167220 Return on investment 32.6% =167220/(636400-123600) Alternative 2: CM ratio=(570800-342480)/570800= 40% Controllable margin 210220 =(570800+107500)*0.4-61100 Return on investment 33.0%

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