Keenan Music's CEO has been pondering about the recent proposal of the Specialty Guitar Project. The accountant has done a capital budgeting analysis on the project and outlined the conditions that this project would be acceptable. However, the CEO is concerned about the impact of accepting this project on the company's Return on Investment, which is a measure that is currently used in CEO's bonus contract. The CEO will receive extra bonus if the company's ROI improves from prior year. So, the accountant is asked to do a further analysis on this project.

The accountant has gathered the following information related to the Specialty Guitar Project and the company's financial information this year below: Special Guitar Project Annual Sales revenue $ 650,000 Contribution margin ratio 60% Annual fixed expenses $ 156,000 Required investment in assets $ 830,000 Keenan Music financial data this year Sales revenue Operating net income Operating assets Minimum required return $ 9,500,000 $ 1,179,393 $ 3,375,000 15% 1 What is the annual operating net income for the Specialty Guitar? Operating Net Income Compute the margin, turnover, and Return on Investment (ROI) for Keenan Music this year, for the Specialty Guitar by itself, and for Keenan Music next year assuming that the Specialty Guitar is added. 1 Margin 2 Turnover -3 Return on Investment This Year Specialty Guitar Next Year, adding Specialty Guitar