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Reimer Division's Operating Results Include \bullet Controllable Margin, $150,000 \bullet Sales Revenue, $1,200,000

Question 171

Essay

Reimer Division's operating results include:
\bullet Controllable margin, $150,000
\bullet Sales revenue, $1,200,000
\bullet Operating assets, $500,000
Reimer is considering a project with sales of $120,000, expenses of $84,000, and an investment of $180,000. Reimer's required rate of return is 15%.
Instructions
Determine whether Reimer should accept this project.

Correct Answer:

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Current ROI = $150,000 ÷ $500,000 = 30%
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