Question
1) Lassiter Inc. reported the following results from last year's operations: Sales $ 7,200,000 Variable expenses 5,400,000 Contribution margin 1,800,000 Fixed expenses 1,296,000 Net operating
1) Lassiter Inc. reported the following results from last year's operations:
Sales $ 7,200,000
Variable expenses 5,400,000
Contribution margin 1,800,000
Fixed expenses 1,296,000
Net operating income $ 504,000
Average operating assets $ 4,000,000
At the beginning of this year, the company has a $800,000 investment opportunity with the following characteristics:
Sales $ 2,480,000
Contribution margin ratio 40 % of sales
Fixed expenses $ 868,000
The company's minimum required rate of return is 14%.
Last year's residual income was closest to:
A) $504,000
B) ($56,000)
C) $460,000
D) ($475,200)
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