Images.com is a small Internet retailer of high-quality posters. The company has
ID: 2373322 • Letter: I
Question
Images.com is a small Internet retailer of high-quality posters. The company has $800,000 in operating assets and fixed expenses of $160,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5 million per year. The company%u2019s contribution margin ratio is 10%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 10 cents.
Complete the following table showing the relationship between sales and return on investment (ROI).(Round your percentage answers to 2 decimal places. Omit the "$" and "%" signs in your response.)
Images.com is a small Internet retailer of high-quality posters. The company has $800,000 in operating assets and fixed expenses of $160,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5 million per year. The company%u2019s contribution margin ratio is 10%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 10 cents.
Explanation / Answer
Net operating income = 0.1*sales - 160000 and ROI = net operating income/800000 *100 %
Sales........................ Net operating income......................ROI
4500000.......................290000.........................................36.25
4600000.......................300000........................................37.5
4700000.......................310000........................................38.75
4800000......................320000.........................................40
4900000......................330000........................................41.25
5000000......................340000........................................42.5
Company's ROI increases as sales increases