The printing division at a small factory is in need of a new printer and is currently comparing their choices. They have narrowed it down to two options: What is the difference in Return on Investment between the two machines based on the information provided? (Do not round intermediate calculations.)
A) Machine 1 has an ROI that is 4.43% higher than Machine 2.
B) Machine 1 has an ROI that is 4.43% lower than Machine 2.
C) Machine 1 has an ROI that is 5.17% higher than Machine 2.
D) Machine 1 has an ROI that is 5.17% lower than Machine 2.

Question

The printing division at a small factory is in need of a new printer and is currently comparing their choices. They have narrowed it down to two options:  What is the difference in Return on Investment between the two machines based on the information provided? (Do not round intermediate calculations.)
A) Machine 1 has an ROI that is 4.43% higher than Machine 2. 
B) Machine 1 has an ROI that is 4.43% lower than Machine 2. 
C) Machine 1 has an ROI that is 5.17% higher than Machine 2. 
D) Machine 1 has an ROI that is 5.17% lower than Machine 2.

Quizplus · Accepted Answer

This question requires familiarity with the formula for ROI: (Operating Income/Sales) times (Sales/Investment). The sales will cancel out, leaving: Operating Income/Investment. Now, calculate this value for each machine. Machine 1: ($3,400 - $1,100)/$12,000 = 19.17%, and Machine 2: ($2,200 - $800)/$9,500 = 14.74%. Now, find the difference between the two ROIs by subtracting Machine 2's value from Machine 1's value. 19.17% - 14.74% = 4.43% higher ROI for Machine 1 (Choice A).

The Printing Division at a Small Factory Is in Need