Rhein Manufacturing Recorded Operating Data for Its Auto Accessories Division

question 158

Multiple Choice

Rhein Manufacturing recorded operating data for its auto accessories division for the year. $$\begin{array} { l r } \text { Sales } & \$ 750,000 \\\text { Contribution margin } & 150,000 \\\text { Total direct fixed costs } & 90,000 \\\text { Average total operating assets } & 400,000\end{array}$$ How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30000 assuming fixed costs are held constant?

• A) 45.0%
• B) 22.5%
• C) 15.0%
• D) 12.0%

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Definitions:

Risk-free Return

The theoretical return on an investment with zero risk of financial loss, typically associated with government bonds.

Treasury Bills

Short-term government securities issued at a discount from the face value and maturing at par, used as a tool for managing liquidity and financing government debt.

Common Stocks

Type of equity security that represents ownership in a corporation, offering voting rights and potential dividends.

Efficient Markets Hypothesis

A theory that suggests that financial markets are “informationally efficient,” meaning that asset prices always reflect all available information.