Question

For the past year, Allargando Company recorded sales of $500,000 and average operating assets of $250,000. What is the margin that Allargando Company needed to earn in order to achieve an ROI of 12%? Multiple Choice 6.00% 12.00% 2.00% 8.33%

Answer 1

6.00%

Step-by-step explanation:

The company's desired return amount is given by the ROI multiplied by the amount invested, in this case, the average operating assets:

`R=0.12*\$250,000\\R=\$30,000`

The margin required in order to achieve a return of $30,000 is given by:

`M= (R)/(sales) =(\$30,000)/(\$500,000) \\M= 0.06 = 6.00\%`

Allargando Company's margin must be 6% in order to achieve a ROI of 12%.