Hamilton and Battles, Ltd. produces and sells two products-guitar cases and violin cases. Each of these products is made in a dedicated manufacturing facility, and the product line managers are evaluated based on the product line's return on investment. The following data is from the most recent year of operations.

Required
a. Calculate the margin, asset turnover, and return on investment for each product line.
b. Evaluate the relative performance of each product line manager.
c. Both product line managers would like to improve their respective returns on investment, and each manager has a different idea about how to accomplish this.
1. If the guitar case product line manager was able to increase sales volume such that the new asset turnover was 1.75 times, what would be the new operating income and the new return on investment?
2. If the violin case product line manager was able to reduce variable costs by 5%, what would be the new operating income and the new return oninvestment?

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Guitar Cases Violin Cases Sales Variable costs Direct fixed costs Average assets $3,000,000 1,200,000 1,440,000 2,000,000 $4,500,000 2,700,000 1,530,000 1,500,000