The Appliance Division of Malone Manufacturing Company reported the following results for 2002: Sales Variable costs Controllable fixed costs Average operating assets $4,000,000 3,200,000 200,000 3,000,000
The Appliance Division of Malone Manufacturing Company reported the following results for 2002: Sales Variable costs Controllable fixed costs Average operating assets $4,000,000 3,200,000 200,000 3,000,000
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 14EB: Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are...
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Question
Management is considering the following independent alternative courses of action in 2003 in
order to maximize the
1. Reduce controllable fixed costs by 15% with no change in sales or variable costs.
2. Reduce average operating assets by 20% with no change in controllable margin.
3. Increase sales $600,000 with no change in the contribution margin percentage.
Instructions
(a) Compute the return on investment for 2002.
(b) Compute the expected return on investment for each of the alternative courses of action.
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