Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Westerville Company reported the following results from last years operations: Sales $ 1,750,000 Variable expenses 520,000 Contribution margin 1,230,000 Fixed expenses 880,000 Net operating income

Westerville Company reported the following results from last years operations:

Sales $ 1,750,000
Variable expenses 520,000
Contribution margin 1,230,000
Fixed expenses 880,000
Net operating income $ 350,000
Average operating assets $ 875,000

At the beginning of this year, the company has a $200,000 investment opportunity with the following cost and revenue characteristics:

Sales $ 320,000
Contribution margin ratio 60 % of sales
Fixed expenses $ 128,000

The companys minimum required rate of return is 20%.

a.) What is last years return on investment (ROI)?

b.) What is the turnover related to this years investment opportunity?

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

d.) if the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?

e.) 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.)

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

Managerial Accounting For Decision Making

Authors: Seohee Park

1st Edition

B08HCQCN2G

More Books

Students also viewed these Accounting questions

Question

estion 25

Answered: 1 week ago