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Question - Heritage Hockey Sticks is a Canadian company that aims to grow the game of hockey through the effort of making and supplying hockey sticks at price points that are more affordable. The company has two main divisions: Wholesale (sold via retailers) and Teams (sold to teams and organizations directly). Each division's manager has the authority to make investments as needed and is evaluated based largely on ROI. The Wholesale division reported the following results for the fiscal 2020:
Sales $425,000
Variable costs 306,000
Controllable fixed costs 103,000
Average operating assets 175,000
Required -
(a) Assume that the manager of the Wholesale division is able to reduce the operating assets by $20,000 without any change in sales or operating income. Compute the base-line and the adjusted ROIs. What should the manager do?
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