| The controllable margin plus the additional income, and the average operating assets plus the new machine must be used in to determine the new ROI. | |
Dax Pet Foods compiled the following information for the year for its dog division
| Average operating assets | $3,500,000 | |
| Controllable margin | 315,000 |
Dax’s corporate office expects the division to earn a minimum return of 8%. Suppose the dog division invests in a new machine that will produce a new dog food product. The machine is expected to generate $19,500 of controllable profit and will cost $150,000. If Dax buys the new machine, what happens to ROI?
| a.It will be 9%. |
b.
|
|
It will increase to 9.16% |
c.
|
|
It will become 9.6%. |
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