Question

At Ben Dover Corp, management is evaluated by comparing budgeted ROI to actual ROI each year. Ben Dover's management accountant will calculate the firm's return on investment by:

A. Multiplying the capital turnover by the return on sales.
B. Dividing the capital turnover by the return on sales.
C. Dividing average invested capital by sales.
D. Multiplying operating income by capital turnover.

Answer 1

To calculate the return on investment (ROI) for Ben Dover Corp, the management accountant needs to divide the average invested capital by sales. This is option C.

Step-by-step explanation:

In order to calculate the return on investment (ROI) for Ben Dover Corp, the management accountant will need to divide the average invested capital by sales. This is option C.

The formula for ROI is:

ROI = (Operating Income / Average Invested Capital) * 100

Therefore, to calculate ROI, you would need to divide average invested capital by sales.