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Images.com is a small Internet retailer of high-quality posters. The company has $800,000 in operating assets and fixed expenses of

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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€™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:
1. Complete the following table showing the relationship between sales and return on investment (ROI).

Images.com is a small Internet retailer of high-quality posters.

2. What happens to the company€™s return on investment (ROI) as sales increase?Explain.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Transcribed Image Text:

Net Operating Income Average Operating Assets Sales ROI $290,000 $4,500,000 $4,600,000 $4,700,000 $4,800,000 $4,900.000 $5,000,000 $800,000 $800,000 $800,000 $800,000 $800,000 $800,000 2

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1 b c Net Average a Operating Operating ROI Sales Income Assets b c 4 500 000 29…View the full answer


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Related Book For  answer-question
Managerial Accounting

Managerial Accounting

ISBN: 9780073526706

12th Edition

Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer

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Question Details
Chapter # 12
Section: Exercises
Problem: 19
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Question Posted: March 31, 2012 01:29:40
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