The Shiganshina Division of Paradis Co. reported the following data for the current year.
Sales: $7,500,000
Variable Costs: $4,000,000
Controllable fixed costs: $1,250,000
Average operating assets: $6,000,000
Top management asks the manager of the Shiganshina Division to submit plans to improve the return on investment (ROI) in the next year. The manager is considering the following two independent options as courses of action.
1. Reduce average operating assets by 12%.
2. Reduce variable costs by $1,000,000
Given the two options, check all that apply:
Group of answer choices
The new ROI under Option 1 is 37.5%
The new ROI under Option 2 is 54.2%
Management should proceed with Option 2 since it creates the greater ROI
Management should be indifferent between the two options
The new ROI under Option 1 is 42.6%
ROI is the same under both options