Sanders Siding produces and sells two products—aluminum and vinyl. Each of these products is made in a dedicated manufacturing facility, and the product line managers are evaluated based on the product line’s return on investment. The following data is from the most recent year of operations.
Sales $4,000,000 $3,000,000
Variable costs 1,800,000 1,800,000
Direct fixed costs 1,500,000 900,000
Average assets 2,000,000 1,200,000
Both product line managers would like to improve their respective returns on investment, and each manager has a different idea about how to accomplish this. If the vinyl product line manager was able to reduce variable cost per unit by 8%, what would be the new operating income? What would be the new return on investment?
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