Oakley Co. produces pipes.
Oakley Co. operating results include:
Controllable margin, $150,000
Sales revenue, $1,200,000
Operating assets, $500,000
Oakley Co. is thinking of project with sales of $120,000, expenses of $84,000, and investment of $180,000. Oakley Co. required rate of return is 15%. Should Oakley Co. accept this project?
Instructions:
Calculate division's current ROI, ROI of project, and find out if Oakley Co. should accept this project based upon above data.