For 2012, Division a of Peoria Company Reported Operating Assets

Essay

For 2012, Division A of Peoria Company reported operating assets of $8,500,000, revenues of $6,800,000, and operating expenses of $5,760,000. The company has established a target return on investment (ROI) of 14% for the division.
Required:
a) Calculate the 2012 ROI for the division. Did the division achieve its target ROI for the year?
b) For 2013, Division A managers expect that its operating assets will stay at about the same level as for 2012. Variable expenses for 2012 were $4,080,000, and the remaining expenses were fixed. The managers expect that the contribution margin ratio for 2013 will be the same as for 2012 and that the amount of fixed expenses will not change. To what level must sales increase in 2013 to achieve the target ROI?