Calculating sales level which generate return on investment


Manager of Waco Division of National Church Tours is creating budget for upcoming year. At this point, he has found out that average total assets for upcoming year will equal $4,000,000. Manager is estimated on amount of residual income generated by division. Suppose variable costs in Waco Division are expected to equal 60% of total sales and fixed costs are expected to equal $400,000.

A. Calculate sales level which would generate a 20% return on investment.

B. Suppose rate of return is 15%, find out level of sales which would generate $200,000 of residual income.

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Accounting Basics: Calculating sales level which generate return on investment
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