Betsy Union Is the Pika Division Manager and Her Performance

question 155

Multiple Choice

Betsy Union is the Pika Division manager and her performance is evaluated by executive management based on Division ROI. The current controllable margin for Pika Division is $46000. Its current operating assets total $210000. The division is considering purchasing equipment for $40000 that will increase sales by an estimated $10000 with annual depreciation of $10000. If the equipment is purchased what will happen to the return on investment for the division?

• A) An increase of 0.5%
• B) A decrease of 0.5%
• C) A decrease of 3.5%
• D) It will remain unchanged.

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