Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Foundational 15 (Algo) [LO11-1, LO11-2] Westerville Company reported the following results from last years operations: Sales $ 1,800,000 Variable expenses 740,000 Contribution margin 1,060,000

The Foundational 15 (Algo) [LO11-1, LO11-2]

Westerville Company reported the following results from last years operations:

Sales $ 1,800,000
Variable expenses 740,000
Contribution margin 1,060,000
Fixed expenses 700,000
Net operating income $ 360,000
Average operating assets $ 1,200,000

At the beginning of this year, the company has a $400,000 investment opportunity with the following cost and revenue characteristics:

Sales $ 600,000
Contribution margin ratio 60 % of sales
Fixed expenses $ 288,000

The companys minimum required rate of return is 10%.

4. What is the margin related to this years investment opportunity?

5.What is the turnover related to this years investment opportunity? (Round your answer to 1 decimal place.)

6. What is the ROI related to this years investment opportunity?

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)

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., 0.1234 should be considered as 12.3%.))

12.What is the residual income of this years investment opportunity?

13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Computerized Accounting With Quickbooks 2018

Authors: James B. Rosa, Kathleen Villani

1st Edition

0763882674, 9780763882679

More Books

Students also viewed these Accounting questions