Question

Required information

The Axle Division of LaBate Company makes and sells only one product. Annual data on the Axle Division's single product follow:

Unit Selling Price	$50
Unit Variable Cost	$30
Total Fixed Costs	$200,000
Average Operating Assets	$750,000
Minimum Required Rate of Return	12%

If Axle sells 16,000 units per year, what would be the return on investment?

Multiple Choice

• 16%.

• 15%.

• 12%.

• 18%.

Answer 1

Correct answer------------16%

Working

Net income	$            120,000.00
Average Operating assets	$            750,000.00
Return on Investment (Net income / Average operating asset)	16.00%

.

Sales revenue	$         800,000
Variable costs	$         480,000
Contribution margin	$         320,000
Fixed cost	$         200,000
Net income	$         120,000