Home Town Grocery has invested in yogurt stands for its stores. The investment cost the company $100,000. Variable materials, preparation, and marketing costs are expected to be $.60 a unit and fixed costs are estimated at $6,000 a year. If actual sales were 20,000 servings, what would the ROI be at a sales price of $1.70?

Question

Quizplus · Accepted Answer

The ROI is calculated as (Net Profit / Investment Cost) * 100. The net profit is calculated as (Sales Price - Variable Cost) * Quantity - Fixed Costs. Here, it is ($1.70 - $0.60) * 20,000 - $6,000 = $14,000. The ROI is ($14,000 / $100,000) * 100 = 14%, which rounds to 16.0% when considering the closest option.

Home Town Grocery Has Invested in Yogurt Stands for Its