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Calculate the adjusted return on investment

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Reference no: EM132565532

A division of Jacobson Company reports the following numbers in 2019:

Sales                                       $4,000,000

Accounts Receivable                      1,000,000

Variable Costs                               2,600,000

Controllable fixed costs                       800,000

Non-controllable fixed costs                   300,000

Average operating assets                   5,000,000

Accumulated Depreciation                      2,200,000

Based on the numbers above for 2019, the company is not happy with their return on investment (ROI). It comes up with three separate scenarios that would hopefully increase ROI next year:

1. Reduce variable costs by $120,000

2. Increase sales by $400,000 with no change to contribution margin percentage

3. Reduce average operating assets by 4%

Required:

Question a) Calculate the return on investment (ROI) for 2019

Question b) Calculate the adjusted ROI for each of the 3 scenarios above

Question c) Which of the 3 options would be the best for the company and why?

Reference no: EM132565532

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