The service division of Raney Industries reported the following results for 2020.
Sales ………………………………………… $500,000
Variable costs …………………………… 300,000
Controllable fixed costs ……………. 75,000
Average operating assets …………. 625,000
Management is considering the following independent courses of action in 2021 in order to maximize the return on investment for this division.
1. Reduce average operating assets by $125,000, with no change in controllable margin.
2. Increase sales $100,000, with no change in the percentage.
a. Compute the controllable margin and the return on investment for 2020.
b. Compute the controllable margin and the on investment for 2021 for each proposed alternative.
