Benet Division of United Refinery Company's operating results include: controllable margin $200000; sales $2200000; and operating assets $800000. The Benet Division's ROI is 25%. Management is considering a project with sales of $100000 variable expenses of $60000 fixed costs of $40000; and an asset investment of $150000. Should management accept this new project?
A) No since ROI will be lowered.
B) Yes since ROI will increase.
C) Yes since additional sales always mean more customers.
D) No since a loss will be incurred.

Question

Quizplus · Accepted Answer

The ROI of the Benet Division will decrease if the new project is accepted because the project has a lower ROI than the division's current ROI of 25%. As a result, accepting the project would lead to a decrease in the division's overall profitability.

Benet Division of United Refinery Company's Operating Results Include: Controllable