Question
Westerville Company reported the following results from last years operations: Sales $ 1,300,000 Variable expenses 440,000 Contribution margin 860,000 Fixed expenses 600,000 Net operating income
Westerville Company reported the following results from last years operations: |
Sales | $ | 1,300,000 |
Variable expenses | 440,000 | |
Contribution margin | 860,000 | |
Fixed expenses | 600,000 | |
Net operating income | $ | 260,000 |
Average operating assets | $ | 812,500 |
This year, the company has a $162,500 investment opportunity with the following cost and revenue characteristics: |
Sales | $ | 260,000 | |
Contribution margin ratio | 80 | % of sales | |
Fixed expenses | $ | 182,000 | |
The companys minimum required rate of return is 15%. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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