Posters.com is a small Internet retailer of high-quality posters. The company has $720,000 in operat
Posters.com is a small Internet retailer of high-quality posters. The company has $720,000 in operating assets and fixed expenses of $154,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5,300,000 per year. The company’s contribution margin ratio is 11%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 11 cents.
Required:
1. Complete the following table showing the relation between sales and return on investment (ROI). Sales Net Operating Average Operating ROI Income Assets % $4,800,000 $374,000 $720,000 % $4,900,000 $720,000 % $5,000,000 $720,000 % $5,100,000 $720,000 % $5,200,000 $720,000 % $5,300,000 $720,000 %
2. What happens to the company’s return on investment (ROI) as sales increase? Required 1 Required 2
What happens to the company’s return on investment (ROI) as sales increase? Increases Decreases
does it increase or decrease
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