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Lou Alabassi is the Northwest Territories Division manager and his performance is evaluated by executive management based on Division ROI. The current controllable margin for Northwest Territories Division is $46,000. Its current operating assets total $210,000. The Division is considering purchasing equipment for $40,000 that will increase sales by an estimated $10,000, with annual amortization of $10,000. If the equipment is purchased, what will happen to the return on investment for the division?

A) A decrease of 0.5%

B) A decrease of 3.5%

C) It will remain unchanged

D) An increase of 0.5%

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Accounting Basics, Accounting

Category:- Accounting Basics
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