An investment centre generated a contribution margin of $200,000, controllable fixed costs of $100,000 and sales of $1,000,000.The centre's average operating assets were $400,000.How much is the return on investment?
A)25%
B)175%
C)50%
D)75%

Question

Quizplus · Accepted Answer

The return on investment (ROI) is calculated as (Net Operating Income / Average Operating Assets). Net Operating Income is Contribution Margin - Controllable Fixed Costs = $200,000 - $100,000 = $100,000. ROI = $100,000 / $400,000 = 0.25 or 25%.

An Investment Centre Generated a Contribution Margin of $200,000, Controllable