Question

For its three investment centers, Gerrard Company accumulates the following data: I II III Sales $1,941,000 $4,018,000 $3,956,000 Controllable margin 884,340 2,065,180 4,850,800 Average operating assets 4,913,000 7,943,000 12,127,000 Compute the return on investment (ROI) for each center.

Answer 1

Answer:

Return on investment (ROI) for I  = 18%

Return on investment (ROI) for II  =26%

Return on investment (ROI) for III  = 40%

Explanation:

Return on investment (ROI) = Controllable margin / Average operating assets

Return on investment (ROI) for I = $884,340 / $4,913,000 = 18%

Return on investment (ROI) for II = $2,065,180 / $7,943,000 = 26%

Return on investment (ROI) for III = $4,850,800 / $12,127,000 = 40%