Images.com is a small Internet retailer of high-quality posters. The company has $750,000 inoperating assets and fixed expenses of $165,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $5.3 millionper year. The company's contribution margin ratio is 9%, which means that an additional dollar of sales results in additional contribution margin, and net operating income, of 9 cents.
| Required: |
| 1. |
Complete the following table showing the relationship between sales and return on investment (ROI). (Round your percentage answers to 2 decimal places. Omit the "$" and "%" signs in your response.)
|
| Sales |
Net Operating
Income |
Average
Operating
Assets |
ROI |
| $4,800,000 |
$267,000 |
$750,000 |
% |
| $4,900,000 |
$ |
$750,000 |
% |
| $5,000,000 |
$ |
$750,000 |
% |
| $5,100,000 |
$ |
$750,000 |
% |
| $5,200,000 |
$ |
$750,000 |
% |
| $5,300,000 |
$ |
$750,000 |
% |
|
| 2. |
What happens to the company's return on investment (ROI) as sales increase? (Round youranswer to 2 decimal places. Omit the "%" sign in your response)
|
| ROI |
(Click to select)increases bywill not changedecreases by |
|
%
|