The service division of Metro Industries reported the following results for 2011.
|
Sales |
$400,000
|
|
Variable costs |
320,000
|
|
Controllable fixed costs |
40,800 |
|
Average operating assets |
280,000
|
Management is considering the following independent courses of action in 2012 in order to maximize the return on investment.
1. Reduce average operating assets by $80,000, with no change in controllable margin.
2. Increase sales $80,000, with no change in the contribution margin percentage.
a. Compute controllable margin and the return on investment for 2011.
b. Compute controllable margin and the expected return on investment.
