Question
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 |
| 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%. |
References
Section BreakFoundational [LO11-1, LO11-2]
1.
value: 10.00 points
Required information
Foundational 11-1
| Required: |
| 1. | What is last years margin? |
References
eBook & Resources
WorksheetFoundational 11-1
2.
value: 10.00 points
Required information
Foundational 11-2
| 2. | What is last years turnover? (Round your answer to 1 decimal place.) |
References
eBook & Resources
WorksheetFoundational 11-2
3.
value: 10.00 points
Required information
Foundational 11-3
| 3. | What is last years return on investment (ROI)? |
References
eBook & Resources
WorksheetFoundational 11-3
4.
value: 10.00 points
Required information
Foundational 11-4
| 4. | What is the margin related to this years investment opportunity? |
References
eBook & Resources
WorksheetFoundational 11-4
5.
value: 10.00 points
Required information
Foundational 11-5
| 5. | What is the turnover related to this years investment opportunity? (Round your answer to 1 decimal place.) |
References
eBook & Resources
WorksheetFoundational 11-5
6.
value: 10.00 points
Required information
Foundational 11-6
| 6. | What is the ROI related to this years investment opportunity? |
References
eBook & Resources
WorksheetFoundational 11-6
7.
value: 10.00 points
Required information
Foundational 11-7
| 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)) |
References
eBook & Resources
WorksheetFoundational 11-7
8.
value: 10.00 points
Required information
Foundational 11-8
| 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.) |
References
eBook & Resources
WorksheetFoundational 11-8
9.
value: 10.00 points
Required information
Foundational 11-9
| 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%.)) |
Garrison 15e Recheck 2014-12-29
References
eBook & Resources
WorksheetFoundational 11-9
10.
value: 10.00 points
Required information
Foundational 11-10
| 10-a. | If Westervilles 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? | ||||
| |||||
| 10-b. | Would the owners of the company want her to pursue the investment opportunity? | ||||
|
References
eBook & Resources
WorksheetFoundational 11-10
11.
value: 10.00 points
Required information
Foundational 11-11
| 11. | What is last years residual income? |
References
eBook & Resources
WorksheetFoundational 11-11
12.
value: 10.00 points
Required information
Foundational 11-12
| 12. | What is the residual income of this years investment opportunity? |
References
eBook & Resources
WorksheetFoundational 11-12
13.
value: 10.00 points
Required information
Foundational 11-13
| 13. | If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? |
References
eBook & Resources
WorksheetFoundational 11-13
14.
value: 10.00 points
Required information
Foundational 11-14
| 14. | If Westervilles 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? | ||||
|
References
eBook & Resources
WorksheetFoundational 11-14
15.
value: 10.00 points
Required information
Foundational 11-15
| 15-a. | Assume that the contribution margin ratio of the investment opportunity was 50% instead of 60%. If Westervilles 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? | ||||
|
| 15-b. | Would the owners of the company want her to pursue the investment opportunity? | ||||
|
References
eBook & Resources
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Financial Accounting Impact On Decision Makers
Authors: Gary A. Porter, Curtis L. Norton
7th Edition
1111464936, 978-1111464936
