Question
Westerville Company reported the following results from last years operations: Sales $ 1,200,000 Variable expenses 420,000 Contribution margin 780,000 Fixed expenses 600,000 Net operating income
Westerville Company reported the following results from last years operations:
Sales | $ | 1,200,000 |
Variable expenses | 420,000 | |
Contribution margin | 780,000 | |
Fixed expenses | 600,000 | |
Net operating income | $ | 180,000 |
Average operating assets | $ | 600,000 |
At the beginning of this year, the company has a $137,500 investment opportunity with the following cost and revenue characteristics:
Sales | $ | 220,000 | |
Contribution margin ratio | 60 | % of sales | |
Fixed expenses | $ | 99,000 | |
The companys minimum required rate of return is 20%.
Required:
1. What is last years margin?
2. What is last years turnover?
3. What is last years return on investment (ROI)?
4. What is the margin related to this years investment opportunity?
5. What is the turnover related to this years investment opportunity?
6. What is the ROI related to this years investment opportunity?
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