For its three investment centers, Bramble Company accumulates the following data: I II III Sales $2,000,000...

For its three investment centers, Bramble Company accumulates the following data: I II III Sales $2,000,000 $3,650,000 $4,030,000 Controllable margin 1,400,000 2,071,930 3,633,240 Average operating assets 5,000,000 7,590,000 9,330,000 The centers expect the following changes in the next year: (I) increase sales 20%; (II) decrease costs $410,000; (III) decrease average operating assets $490,000. Compute the expected return on investment (ROI) for each center. Assume center I has a controllable margin percentage of 70%. (Round ROI to 1 decimal place, e.g. 1.5.)

I

II

III

Expert Solution

Existing Data:

	i	ii	iii
Sales (X)	2,000,000.00	3,650,000.00	4,030,000.00
Controllable Margin (Y)	1,400,000.00	2,071,930.00	3,633,240.00
Controllable Costs (X-Y)	600,000.00	1,578,070.00	396,760.00
Average Operating Assets	5,000,000.00	7,590,000.00	9,330,000.00

After incorporating the above:

Sales	2,000,000*120% = 2,400,000.00	3,650,000.00	4,030,000.00
Controllable Costs	2,400,000*(100-70)%= 720,000.00	1,578,070 -410000= 1,168,070.00	3,633,240.00
Controllable Margin (A)	1,680,000.00	2,481,930.00	396,760.00
Average Operating Assets (B)	5,000,000.00	7,590,000.00	9330,000 - 490,000 = 8,840,000.00
*ROI = A/B100**	33.6%	32.7%	4.5%

ekkarill92 answered 1 year ago

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