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28 June, 17:08

Naples, Inc. recorded operating data for its shoe division for the year. Sales $750,000 Contribution margin 135,000 Total fixed costs 90,000 Average total operating assets 300,000 How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30,000, assuming fixed costs are held constant?

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  1. 28 June, 19:56
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    25%

    Explanation:

    New contribution margin = Old contribution margin + Increase

    = 135,000 + 30,000

    = 165,000

    Net Income = Contribution margin - Total fixed expense

    = $165,000 - $90,000

    = $75,000

    ROI = Net income : Average operating assets

    = 75,000 : 300,000

    = 25%
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