For Year 1,Division C of Deerfield Company Reported Operating Assets

question 75

Essay

For Year 1,Division C of Deerfield Company reported operating assets of $8,800,000,revenues of $6,600,000,and operating expenses of $5,760,000.The company has established a target return on investment (ROI)of 10% for the division.
Required:
1)Calculate the Year 1 ROI for the division.Did the division achieve its target ROI for the year?
2)For Year 2,Division C managers expect that its operating assets will stay at about the same level as for Year 1.Variable expenses for Year 1 were $3,960,000,and the remaining expenses were fixed.The managers expect that the contribution margin ratio for Year 2 will be the same as for Year 1 and that the amount of fixed expenses will not change.To what level must sales increase in Year 2 to achieve the target ROI?