Cost-Volume-Profit Analysis and Return on Investment (ROI) [L011-1] Posters.com

Question

Cost-Volume-Profit Analysis and Return on Investment (ROI) [L011-1] Posters.com is a small Internet retailer of high-quality posters. The company has $710,000 in operating assets and fixed expenses of $167,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5,100,000 per year. The company's 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. Required: Complete the following table showing the relation between sales and return on investment (ROI) (rounded). (Round your percentage answers to 2 decimal places.) What happens to the company's return on investment (ROI) as sales increase? increases Decreases

Explanation / Answer

sale operating income operating asset ROI 4600000 293000 710000 41.27% 4700000 303000 710000 42.68% 4800000 313000 710000 44.08% 4900000 323000 710000 45.49% 5000000 333000 710000 46.90% 5100000 343000 710000 48.31%

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