Use the Following Information to Answer Question Waverly Company Has Set a Target Return on Investment (ROI)

question 31

Essay

Use the following information to answer Question. The Furniture Division of Waverly Company reports the following results for 2012: $$\begin{array} { l l } \text { Revenues } & \$ 400,000 \\\text { Operating expenses } & \$ 360,000 \\\text { Operating income } & \$ 40,000 \\\text { Operating assets } & \$ 500,000\end{array}$$
Waverly Company has set a target return on investment (ROI) of 12% for the Furniture Division.
Assume that 60% of the Furniture Division's operating expenses are variable. To what level would revenues have to increase to achieve the desired 12% ROI? Assume that the amount of operating assets will continue to be $500,000.

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Definitions:

Third-Party

An entity involved in a transaction or relationship but not one of the primary or principal parties concerned, often providing services or mediation.

Maslow's Hierarchy Of Needs

A psychological theory proposing that humans have five levels of needs that motivate their behavior, from basic physiological needs to self-actualization.

Hierarchy Of Importance

A ranking system that establishes priorities based on the relevance or significance of elements within a structure or system.

Motivators

Factors that stimulate desire, energy in people to be continuously interested and committed to a job, role or subject, or to make an effort to attain a goal.