Question

Bramble Corp. recorded operating data for its auto accessories division for the year. Sales $790000 Contribution margin 260000 Total direct fixed costs 90000 Average total operating assets 250000 How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30000, assuming fixed costs are held constant?

Answer 1

80%

Step-by-step explanation:

For computing the return on investment first we have to need the following calculations

New contribution margin = Old contribution margin + increase in contribution margin

= $260,000 + $30,000

= $290,000

And,

Net Income = Contribution margin - Total direct fixed costs

= $290,000 - $90,000

= $200,000

ROI = Net income ÷ average operating assets

= $200,000 ÷ $250,000

= 80%