Question

The data for an investment center is given below. January 1, 2016 December 31, 2016 Current Assets $ 400,000 $ 800,000 Plant Assets 3,000,000 3,800,000 The controllable margin is $440,000. Compute the return on investment for the center for 2016. Return on Investment %.

Answer 1

Return on investment = 11%

Step-by-step explanation:

given data

January 1, 2016 December 31, 2016

Current Assets $400,000 $800,000

Plant Assets 3,000,000 3,800,000

controllable margin = $440,000

to find out

Return on Investment

solution

we get her Return on investment that is express as

Return on investment = Controllable margin ÷ Average Total assets ..............1

here Controllable margin is

Controllable margin =
`(440000)/(400000+3000000)`

Controllable margin = $440000

and Average Total assets is

Average Total assets =
`(800000+3800000)/(2)`

Average Total assets = $4000000

so that

Return on investment =
`(440000)/(4000000)`

Return on investment = 11%