Question

Sunland Company recorded operating data for its shoe division for the year. Sales$760000 Contribution margin240000 Total fixed costs90000 Average total operating assets250000 How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30000, assuming fixed costs are held constant

Answer 1

Answer: 72%

Explanation:

ROI = Net Income/ Average Assets

Assuming Contribution Margin increases by $30,000;

= 240,000 + 30,000

= $270,000

Net income = Contribution margin - Fixed cost

= 270,000 - 90,000

= $180,000

ROI = 180,000 / 250,000

= 72%