The area manager of the Steak House Restaurants is considering two possible expansion alternatives.The required investments, expected controllable margins, and the ROIs of each are as follows: $$\begin{array} { l c c c }
\underline{\text { Project }} &\underline{ \text { Investment }} &\underline{ \text { Controllable Margin }} &\underline{ \text { ROl }} \
\text { Winnipeg }& \$ 300,000 & \$ 100,000 & 33.33 \% \
\text { Regina } & \$ 700,000 & \$ 200,000 & 28.57 \%
\end{array}$$
The Steak House segment has currently $5,000,000 in invested capital and a controllable margin of $1,500,000.Which one of following projects will increase the Steak House division's ROI?

Question

The area manager of the Steak House Restaurants is considering two possible expansion alternatives.The required investments, expected controllable margins, and the ROIs of each are as follows: $$\begin{array} { l c c c } 
\underline{\text { Project }} &\underline{ \text { Investment }} &\underline{ \text { Controllable Margin }} &\underline{ \text { ROl }} \
\text { Winnipeg }& \$ 300,000 & \$ 100,000 & 33.33 \% \
\text { Regina } & \$ 700,000 & \$ 200,000 & 28.57 \%
\end{array}$$
 The Steak House segment has currently $5,000,000 in invested capital and a controllable margin of $1,500,000.Which one of following projects will increase the Steak House division's ROI?

Quizplus · Accepted Answer

The current ROI is 30% ($1,500,000 / $5,000,000). The Winnipeg project has an ROI of 33.33%, which is higher than the current ROI, thus increasing the division's ROI. The Regina project has an ROI of 28.57%, which is lower than the current ROI, thus decreasing the division's ROI.

The Area Manager of the Steak House Restaurants Is Considering