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Images.com is a small Internet retailer of high quality posters. The company has $800,000 in operating assets and fixed expenses of $160,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5 million per year. The company%u2019s contribution margin ratio is 10%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 10 cents. |
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| 1. |
Complete the following table showing the relationship between sales and return on investment (ROI).(Round your percentage answers to 2 decimal places. Omit the “$” and “%” signs in your response.) |
| Sales | Net Operating Income |
Average Operating Assets |
ROI |
| $4,500,000 | $290,000 | $800,000 | % |
| $4,600,000 | $ | $800,000 | % |
| $4,700,000 | $ | $800,000 | % |
| $4,800,000 | $ | $800,000 | % |
| $4,900,000 | $ | $800,000 | % |
| $5,000,000 | $ | $800,000 | % |
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| 2. | What happens to the company’s return on investment (ROI) as sales increase? (Round your answer to 2 decimal places. Omit the “%” sign in your response.) |
| ROI | (Click to select) decreases by will not change increases by | % |