Westerville Company reported the following results from last year's operations;

Sales $1,200,000

Variable expenses 320,000

____________

Contribution margin 880,000

fixed expenses 640,000

__________

Net operating Income $240,000

_________

Average operating assets $600,000

________________

This year, the company has $150,000 investment opportunity with the following cost and revenune

characteristics;

Sales $340,000

Contribution margin ratio 50% of sales

Fixed expenses $84,000

____________________________________________________

The comapny's minimum required rate of return is 15%.

1. What is last year's margin?

margin _________%

2.What is last year's turnover?

3. What is last year's return on investment(ROI)?

4.What is the margin related to this year's investment opportunity?

5.What is the turnover related to this year's investment oppourtunity?

6.What is the ROI related to this year's 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?

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

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

10.-a 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

10b. Would the owners of the company want her to pursue the investment opportunity? yes no

11. What is last year's residual income?

12. What is the residual income of this year's 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?

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 yea

15-a Assume that the contribution margin of the investment opportunity was 40% instead of 50%. If Westerville's chief executive officer will earn a bonus only if her residual income from last year exceeds her residual income from last year, would she pursue the investment opportunity? yes no

15-b. Would the owners of the company want her to pursue the investment opportunity? yes no