Question

Posters.com is a small Internet retailer of high-quality posters. The company has $840,000 in operating assets and fixed expenses of $159,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $4,700,000 per year. The company’s contribution margin ratio is 11%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 11 cents.

Required:

1. Complete the following table showing the relation between sales and return on investment (ROI).

2. What happens to the company’s return on investment (ROI) as sales increase?

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

Complete the following table showing the relation between sales and return on investment (ROI). (Round your percentage answers to 2 decimal places.)

	Sales Net Operating Average Operating ROI Income Assets % $4,200,000 $303,000 $840,000 % $4,300,000 $840,000 % $4,400,000 $840,000 % $4,500,000 $840,000 % $4,600,000 $840,000 % $4,700,000 $840,000 %

• Required 2

What happens to the company’s return on investment (ROI) as sales increase?

	Increasesradio button unchecked1 of 2 Decreasesradio button unchecked2 of 2

Answer 1

Complete the following table showing the relation between sales and return on investment (ROI). (Round your percentage answers to 2 decimal places.)

	Sales Net Operating Average Operating ROI Income Assets % $4,200,000 $303,000 $840,000 36.07 % $4,300,000 314000 $840,000 37.38 % $4,400,000 325000 $840,000 38.69 % $4,500,000 336000 $840,000 40 % $4,600,000 347000 $840,000 41.31 % $4,700,000 358000 $840,000 42.62 %

• Required 2

What happens to the company’s return on investment (ROI) as sales increase?

	Increases radio button