Answer:
LA Fitness
NW DC club
Last year's return on investment (ROI) for the club is:
= 7.2%.
Explanation:
a) Data and Calculations:
Sales                   $12,500,000
Variable expenses         9,380,000
Contribution margin        3,220,000
Fixed expenses            2,716,000
Net operating income      $504,000
Average operating assets $7,000,000
Return on investment = $504,000/$7,000,000 * 100
= 7.2%
The current investment opportunity this year:
Sales               $560,000
Contribution margin ratio 50% of sales
Fixed expenses       $246,400
Investment cost      $750,000
Sales               $560,000
Variable costs         280,000
Contribution margin    280,000 (50% of sales)
Fixed expenses       $246,400
Net operating income   $33,600
ROI = $33,600/$750,000 * 100 = 4.48%
