Assume that Cane expects to produce and sell 57,000 Alphas during the current year. A supplier has offered to manufacture and deliver 57,000 Alphas to Cane for a price of $108 per unit. If Cane buys 57,000 units from the supplier instead of making those units, how much will profits increase or decrease?

Westerville Company reported the following results from last year's operations: Sales Variable expenses $ 1,600,000 700,000 Contribution margin Fixed expenses 900,000 660,000 Net operating income $ 240,000 Average operating assets $ 1,000,000 This year, the company has a $325,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $520,000 % of 70 sales $312,000 The company's minimum required rate of return is 15%. Required: 1. What is last year's margin? Margin ______% 2. What is last year's turnover? (Round your answer to 1 decimal place.) Turnover _______ 3. What is last year's return on investment (ROI)? ROI _______% 4. What is the margin related to this year's investment opportunity? Margin ______% 5. What is the turnover related to this year's investment opportunity? (Round your answer to 1 decimal place.) Turnover _______ 6. What is the ROI related to this year's investment opportunity? ROI _______% 7. If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year? (Round your percentage answer to 1 decimal place (i.e .1234 should be entered as 12.3)) Margin ______% 8. If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? (Round your answer to 2 decimal places.) Turnover _______ 9. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year? (Round your percentage answer to 1 decimal place (i.e .1234 should be entered as 12.3)) ROI _______% 10a. If Westerville's chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity? Yes No 11.What is last year's residual income? Residual Income ______ What is the residual income of this year's investment opportunity? 12 . Residual Income ______ 13 . If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? Residual Income ______ 14 . If Westerville's chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? No Yes 5-a. Assume that the contribution margin ratio of the investment opportunity was 65% instead of 70%. If Westerville's Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? No Yes 15b. Would the owners of the company want her to pursue the investment opportunity? Yes No Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 110,000 units of each product. Its unit costs for each product at this level of activity are given below: Alpha Dire ct materi als Dire ct labor Vari able manuf acturi ng overh ead Trac eable fixed manuf acturi ng $ Beta 24 $ 12 23 26 22 12 23 25 overh ead Vari able sellin g expen ses Com mon fixed expen ses Total cost per unit $ 19 15 22 17 133 $ 107 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. Required: 1. What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line? Alpha Beta Traceable Fixable Overhead [ [ 2. What is the company's total amount of common fixed expenses? Total common fixed expenses ______ 3. Assume that Cane expects to produce and sell 87,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 17,000 additional Alphas for a price of $108 per unit. If Cane accepts the customer's offer, how much will its profits increase or decrease? Net operating income______by______ 4 . Assume that Cane expects to produce and sell 97,000 Betas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 3,000 additional Betas for a price of $46 per unit. If Cane accepts the customer's offer, how much will its profits increase or decrease? Net operating income______by______ 5. Assume that Cane expects to produce and sell 102,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 17,000 additional Alphas for a price of $108 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 9,000 units. a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.) Incremented net operating income_____ b. Based on your calculations above should the special order be accepted? Yes No 6. Assume that Cane normally produces and sells 97,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? Profit____by_____ 7. Assume that Cane normally produces and sells 47,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? Profit____by_____ 8. Assume that Cane normally produces and sells 67,000 Betas and 87,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 11,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease? Profit____by_____ 9 . Assume that Cane expects to produce and sell 87,000 Alphas during the current year. A supplier has offered to manufacture and deliver 87,000 Alphas to Cane for a price of $108 per unit. If Cane buys 87,000 units from the supplier instead of making those units, how much will profits increase or decrease? Profit____by_____ 10. Assume that Cane expects to produce and sell 57,000 Alphas during the current year. A supplier has offered to manufacture and deliver 57,000 Alphas to Cane for a price of $108 per unit. If Cane buys 57,000 units from the supplier instead of making those units, how much will profits increase or decrease? Profit____by_____