Question

Chapter 11 Homework i Saved Help Save & Exit Submit Check my work Posters.com is a small Internet retailer of high-quality posters. The company has $740,000 in operating assets and fixed expenses of $154,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5,100,000 per year. The company's contribution margin ratio is 8%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 8 cents. 2.5 points 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? eBook Complete this question by entering your answers in the tabs below. Print Required 1 Required 2 References Complete the following table showing the relation between sales and return on investment (ROI). (Round your percentage answers to 2 decimal places.) ROI % Sales Net Operating ating Income $4,600,000 $ 214,000 $4,700,000 $ 224,000 $4,800,000 $ 234,000 $4,900,000 $ 244,000 $5,000,000 $ 254,000 $5,100,000 $ 264,000 Average Operating Assets $ 740,000 $ 740,000 $ 740,000 $ 740,000 $ 740,000 $ 740,000 29.00 % 30.00% 32.00% 33.00% 34.00 % 36.00 % (Required 1 Required 2 >

Answer 1

Sales	Net operating income	Average operating assets	ROI %
	[ ( Sales * Contribution margin ratio ) - Fixed expenses ]		[ Net operating income / Average operating assets ]
4600000	214000	740000	28.92%
4700000	222000	740000	30.00%
4800000	230000	740000	31.08%
4900000	238000	740000	32.16%
5000000	246000	740000	33.24%
5100000	254000	740000	34.32%

Required 2 :

Answer : Increases

Explanation : As the sales increases, the net operating income increases and hence the ROI increases.