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Concept introduction:
The Return on Investment is also called ROI. The return means the profit you make as a result of your investments. Return on Investment is a performance measure used to evaluate the profitability or efficiency of an investments or compare the efficiency of a number of investments. ROI is generally defined as the ratio of net profit over the total cost of the investment. ROI is calculated by dividing the net income by the total cost of the investment.
The table showing the relation between sales and return on investment
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Concept introduction:
Return on investment:
The Return on Investment is also called ROI. The return means the profit you make as a result of your investments. Return on Investment is a performance measure used to evaluate the profitability or efficiency of an investments or compare the efficiency of a number of investments. ROI is generally defined as the ratio of net profit over the total cost of the investment. ROI is calculated by dividing the net income by the total cost of the investment.
What happened to the company’s return on investment as sales increase
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MANAGERIAL ACCOUNTING
- Required Information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent Per Unit of sales $95 100% 57 60 $38 40% selling price variable expenses Contribution margin Fixed expenses are $79,000 per month and the company is selling 3,600 units per month. 2-a. Refer to the original data. How much will net operating Income Increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $3 per unit and increase unit sales by 10%. 2-b. Should the higher-quality components be used? Complete this question by entering your answers in the tabs below. Req 2A Req 28 Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher- quality components that increase the variable expense by $3 per unit and increase unit sales by 10%. Net operating income byarrow_forwardProblem II. Omega Enterprises sells two products, Model E100 and F900. Monthly sales and the contribution margin ratios for the two products, follow: Product E100 F900 Total Sales P 700,000 P 300,000 P 1,000,000 Contribution margin ratio 60% 70% The Company’s fixed expenses total P598,500 per month. What is the company’s total contribution margin ratio? What is the company’s total net operating income? The break-even point for the company based on the current sales mix is ______.arrow_forwardBasic CVP Concepts Katayama Company produces a variety of products. One division makes neoprene wetsuits. The division’s projected income statement for the coming year is as follows: Sales (65,000 units) $15,600,000 Less: Variable expenses 8,736,000 Contribution margin $6,864,000 Less: Fixed expenses 4,012,000 Operating income $2,852,000 Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. Round unit contribution margin to the nearest cent and break-even point to the nearest whole unit. Unit contribution margin $ Break-even point units Compute the contribution margin ratio and the break-even point in dollars. Enter the contribution margin ratio as a decimal value rounded to two decimal places, and use this rounded value in the second calculation. Contribution margin ratio Break-even point (rounded to the nearest dollar) $ 2. The divisional manager has decided to increase the advertising…arrow_forward
- Exercise #3 Megacorp and Gadgetron are two competing gadget manufacturers. Information about the price and cost structures of the two manufacturers are given below. Megacorp Gadgetron Selling price per unit 160 160 Variable cost per unit 110 80 Fixed cost per month 46,000 100,000 Required: Calculate the sales volume that will result in Megacorp and Gadgetron having the same operating profit. Prepare a profit-volume graph by plotting profit as a function of the sales volume.Hint: Identify the point where sales volume is zero (i.e., fixed cost on y-intercept) and the break-even point (i.e., x-intercept where profit is zero) and connect the dots.arrow_forwardExercise 20.8 (Static) Using Cost-Volume-Profit Formulas (LO20-4, LO20-5, LO20-6) Arrow Products typically earns a contribution margin ratio of 32 percent and has current fixed costs of $1,640,000. Arrow's general manager is considering spending an additional $100,000 per year to do one of the following: 1. Start a new ad campaign that is expected to increase sales revenue by 4 percent. 2. License a new computerized ordering system that is expected to increase Arrow's contribution margin ratio to 36 percent. Sales revenue for the coming year was initially forecast to equal $6,400,000 (that is, without implementing either of the above options). Required: a-1. Compute the projected operating income for each option? a-2. For each option, how much will projected operating income increase or decrease relative to initial predictions? b. By what percentage would sales revenue need to increase above the current level of $6,400,000 to make the ad campaign as attractive as the ordering system?…arrow_forwardQuestion No. 3 CVP – Applied: Revising Sales Incentives Data concerning Wislocki Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 180 100 % Variable expenses 45 25 % Contribution margin $ 135 75 % Fixed expenses are $1,048,000 per month. The company is currently selling 9400 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $12 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $106,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 440 units. Required: What should be the overall effect on the company's monthly net operating income of this change?arrow_forward
- Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent of Per Unit Sales Selling price Variable expenses $ 135 100% 81 60 Contribution margin $ 54 40% Fixed expenses are $87,00h per month and the company is selling 2,900 units per month. 2-a. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $5 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used? Complete this question by entering your answers in the tabs below. ch 近arrow_forwardxit Data concerning Kardas Corporation's single product appear below: Percent of Per Unit Sales Selling price Variable expenses $ 140 100% 28 20% Contribution margin $ 112 80% The company is currently selling 8,000 units per month. Fixed expenses are $719,000 per month. The marketing manager believes that a $20,000 increase in the monthly advertising budget would result in a 180 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?arrow_forwardEXERCISE 9-10 Cost-Volume-Profit Analysis and Return on Investment (ROI) [LO9-1] Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operating assets and fixed expenses of $150,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $3,000,000 per year. The company's contribution margin ratio is 25%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 25 cents. Required: 1. Complete the following table showing the relation between sales and return on investment (ROI). Net Operating Income Sales Average Operating Assets ROI $2,500,000 $475,000 $1,000,000 $2,600,000 $ ? $1,000,000 $2,700,000 $ ? $1,000,000 $2,800,000 $ ? $1,000,000 $2,900,000 $ ? $3,000,000 $ ? $1,000,000 $1,000,000 222222 ? ? ? ? ? ? 2. What happens to the company's return on investment (ROI) as sales increase? Explain.arrow_forward
- -/1 Question 4 View Policies Current Attempt in Progress ort Sunland Companyrecorded operating data for its Cheap division for the year. Sunland requires its return to be 10%. $1200000 Sales Controllable margin 180000 Total average assets 3600000 Fixed costs 100000 What is the RÓI for the year? O 33% 19% 5% O 8%arrow_forwardRequired information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 135 81 $ 54 Percent of Sales 100% 60 40% Fixed expenses are $87,000 per month and the company is selling 2,900 units per month. 2-a. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher- quality components that increase the variable expense by $5 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used?arrow_forwardView Policies Current Attempt in Progress Sheridan Company sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus) based upon quantity of units sold. Q-Drive has a unit variable cost of $120 and a selling price of $210. Q-Drive Plus has a unit variable cost of $100 and a selling price of $180. The weighted-average unit contribution margin for Sheridan is O $87. O $105. O $210. O $83. Save for Later Attempts: 0 of 1 used Submit Answerarrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning