The following results pertain to an investment center.
$\begin{array}{lc}
\text { Sales } & \$ 1,500,000 \
\text { Variable costs } & 800,000 \
\text { Traceable fixed costs } & 100,000 \
\text { Average investment } & 1,000,000 \
\text { Divisional cost of capital (discount rate) } & 10 \%
\end{array}$How much is the return on investment (ROI) for this investment center?
A)5%.
B)50%.
C)60%.
D)70%.
E)75%.

Question

Quizplus · Accepted Answer

The ROI is calculated as (Net Operating Income / Average Investment). Net Operating Income = Sales - Variable Costs - Traceable Fixed Costs = $1,500,000 - $800,000 - $100,000 = $600,000. ROI = $600,000 / $1,000,000 = 60%.

The Following Results Pertain to an Investment Center How Much Is the Return on Investment (ROI) for This