Cost Volume Profit Analysis and Return on Investment (ROl) posters.com is a small Internet retailer of high quality posters. The company has $1,000,000 in operating assets and fixed expenses of $150,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $3,000,000 per year. The company’s contribution margin ratio is 25%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 25 cents.
Required:
1. Complete the following table showing the relation between sales and return on investment (ROl).
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2. What happens to the company’s return on investment (ROl) as sales increase?Explain.