EKPN Company recorded the following operating data: $$\begin{array} { l l }
\text { Sales } & \$ 1,250,000 \
\text { Contribution margin } & 485,000 \
\text { Total direct fixed costs } & 400,300 \
\text { Total operating assets Jan. 1, 2020 } & 750,000 \
\text { Total operating assets Dec. 31, 2020 } & 790,000 \
\text { EKPN Compary's desired return } & 12 \%
\end{array}$$ What is EKPN Company's ROI, rounded to the nearest whole number?
A)11%
B)12%
C)53%
D)55%

Question

EKPN Company recorded the following operating data: $$\begin{array} { l l } 
\text { Sales } & \$ 1,250,000 \
\text { Contribution margin } & 485,000 \
\text { Total direct fixed costs } & 400,300 \
\text { Total operating assets Jan. 1, 2020 } & 750,000 \
\text { Total operating assets Dec. 31, 2020 } & 790,000 \
\text { EKPN Compary's desired return } & 12 \%
\end{array}$$ What is EKPN Company's ROI, rounded to the nearest whole number?
A)11%
B)12%
C)53%
D)55%

Quizplus · Accepted Answer

ROI (Return on Investment) is calculated as Net Operating Income divided by Average Operating Assets. Net Operating Income is the Contribution Margin minus Total Direct Fixed Costs, which is $485,000 - $400,300 = $84,700. Average Operating Assets is the average of the Total Operating Assets at the beginning and end of the period, which is $(750,000 + 790,000) / 2 = $770,000. Therefore, ROI = ($84,700 / $770,000) * 100 = 11% (rounded to the nearest whole number).

EKPN Company Recorded the Following Operating Data What Is EKPN Company's ROI, Rounded to the Nearest Whole