1. The service division of Metro Industries reported the following results for

1. The service division of Metro Industries reported the following results for 2010.

Sales

$400000

Variable costs

320000

Controllable fixed costs

40800

Average operating assets

280000

Management is considering the following independent courses of action in 2011 in

order to maximize the return on investment for this division.

1. Reduce average operating assets by $80000 with no change in controllable margin.

2. Increase sales $80000 with no change in the contribution margin percentage.

(a) Compute the controllable margin and the return on investment for 2010.

(b) Compute the controllable margin and the expected return on investment for each proposed alternative.