Problem - The service division of Raney Industries reported the following results for 2017.
|
Sales
|
$554,000
|
|
Variable costs
|
332,400
|
|
Controllable fixed costs
|
68,300
|
|
Average operating assets
|
625,200
|
Management is considering the following independent courses of action in 2018 in order to maximize the return on investment for this division.
1. Reduce average operating assets by $122,400, with no change in controllable margin.
2. Increase sales $105,700, with no change in the contribution margin percentage.
Compute the controllable margin and the return on investment for 2017.
Compute the controllable margin and the expected return on investment for each proposed alternative.