The following data are available for the North Division of Chemicals Products,Inc.and the single product it makes:
$\begin{array}{|l|r|}
\hline \text { Unit Selling Price } & \$ 25 \
\hline \text { Variable Cost per Unit } & \$ 15 \
\hline \text { Annual Fixed Costs } & \$ 320,000 \
\hline \text { Average Operating Assets } & \$ 1,500,000 \
\hline
\end{array}$
How many units must South sell each year to have an ROI of 18%?
A) 32,760 units.
B) 35,760 units.
C) 240,000 units.
D) 1,300,000 units.

Question

Quizplus · Accepted Answer

The correct answer is A.The ROI is calculated as follows:ROI = (Net Income / Average Operating Assets) * 100%The net income is calculated as follows:Net Income = (Unit Selling Price - Variable Cost per Unit) * Units Sold - Annual Fixed CostsSubstituting the given values into the above equations, we get:ROI = [(25 - 15) * Units Sold - 320,000] / 1,500,000 * 100%0.18 = (10 * Units Sold - 320,000) / 1,500,0000.18 * 1,500,000 = 10 * Units Sold - 320,000270,000 = 10 * Units SoldUnits Sold = 270,000 / 10Units Sold = 27,000 unitsTherefore, South must sell 27,000 units each year to have an ROI of 18%.

The Following Data Are Available for the North Division of Chemicals