Reference no: EM133051908

Question - The Atlantic Division of Stark Productions Company reported the following results for 2019:

Sales $4,000,000

Variable costs 3,200,000

Controllable fixed costs 300,000

Average operating assets 2,500,000

Management is considering the following independent alternative courses of action in 2020 in order to maximize the return on investment for the division.

1. Reduce controllable fixed costs by 10% with no change in sales or variable costs.

2. Reduce average operating assets by 10% with no change in controllable margin.

3. Increase sales $500,000 with no change in the contribution margin percentage.

Required -

(a) Compute the return on investment for 2019.

(b) Compute the expected return on investment for each of the alternative courses of action.