Naples, Inc. recorded operating data for its shoe division for the year. $$\begin{array} { l r }
\text { Sales } & \$ 750,000 \
\text { Contribution margin } & 135,000 \
\text { Total fixed costs } & 90,000 \
\text { Average total operating assets } & 300,000
\end{array}$$ How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30,000, assuming fixed costs are held constant?

Question

Naples, Inc. recorded operating data for its shoe division for the year. $$\begin{array} { l r } 
\text { Sales } & \$ 750,000 \
\text { Contribution margin } & 135,000 \
\text { Total fixed costs } & 90,000 \
\text { Average total operating assets } & 300,000
\end{array}$$ How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30,000, assuming fixed costs are held constant?

Quizplus · Accepted Answer

The ROI is calculated as (Net Operating Income / Average Operating Assets). The improved contribution margin is $135,000 + $30,000 = $165,000. Net Operating Income = Contribution Margin - Fixed Costs = $165,000 - $90,000 = $75,000. ROI = $75,000 / $300,000 = 25%.

Naples, Inc How Much Is ROI for the Year If Management Is