The service division of Raney Industries reported the following results for 2012. Sales ............$500,000 Variable costs .........
Question:
The service division of Raney Industries reported the following results for 2012.
Sales ............$500,000
Variable costs ......... 300,000
Controllable fixed costs ...... 75,000
Average operating assets ..... 450,000
Management is considering the following independent courses of action in 2013 in order to maximize the return on investment for this division.
1. Reduce average operating assets by $50,000, with no change in controllable margin.
2. Increase sales $100,000, with no change in the contribution margin percentage.
(a) Compute the controllable margin and the return on investment for 2012.
(b) Compute the controllable margin and the expected return on investment for each proposed alternative.
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... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
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Related Book For 
Accounting Tools for business decision making
ISBN: 978-0470095461
4th Edition
Authors: kimmel, weygandt, kieso
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