The service division of Raney Industries reported the following results for 2022.
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 2023 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 contribution margin percentage.
a. Compute the controllable margin and the return on investment for 2022.
b. Compute the controllable margin and the expected return on investment for 2023 for each proposed alternative.
