The red division of the elsa company

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Reference no: EM13963390

The red division of the Elsa Company reported the following data for the current year

Sales $2650000

Variable costs $2200000

Controllable fixed costs $450000

Average operating assets $5350000

Senior management is unhappy with the investment centre's return on investment. It asks the manager of the red division to submit plans to improve the ROI in the next year. The manager believes it is reasonable to consider each of the following independent courses of action.

1. increase sales by $250 000 with no change to the contribution margin percentage

2 reduce variable costs by $125 000

3 reduce average operating assets by 5%

Required

a calculate the return on investment for the current year

b using the ROI formula, calculate the ROI under each of the proposed courses of action (round to the nearest decimal)

Reference no: EM13963390

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