The sales manager of Branch A (Exhibit 12.16) was dismayed with the results. The 20 percent ROAM for the branch was below expectations. The sales manager’s response was “OK, they want better results, then we’ll increase sales by at least 10 percent. But we’ll have to cut prices by 5 percent to do this.” Will this benefit Branch A?

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EXHIBIT 12.16 Analysis of return on assets managed Sales Cost of Goods Sold Gross Margin Less Variable Branch Expenses Salaries Commissions Office expenses Travel and entertainment Branch Contribution to Profit Branch investments Accounts receivable Inventories Earnings as a Percentage of Sales Turnover Branch Percentage Return on Assets Managed Branch A $2,500,000 2,000,000 500,000 (20%) 155,000 25,000 30,000 40,000 250,000 250,000 500,000 750,000 1,250,000 10.0% 2.0 20.0% Branch B $1,500,000 1,275,000 225,000 (15%) 80,000 10,000 20,000 20,000 130,000 95,000 150,000 225,000 375,000 6.3% 4.0 25.2%