2. The ROI increases by 2.5% for each $100,000 increase in sales. This
happens because each $100,000 increase in sales brings in an additional
profit of $25,000. When this additional profit is divided by the average
operating assets of $1,000,000, the result is an increase in the com-
pany’s ROI of 2.5%.
Increase in sales ... $100,000 (a)
Contribution margin ratio... 25% (b)
Increase in contribution margin and net operating
income (a) × (b) ... $25,000 (c)
Average operating assets... $1,000,000 (d)
Increase in return on investment (c) ÷ (d)... 2.5%
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