[The following information applies to the questionsdisplayed below.]
Westerville Company reported the following results from lastyearâs operations:
Sales $ 1,400,000 Variableexpenses 720,000 Contributionmargin 680,000 Fixed expenses 470,000 Net operatingincome $ 210,000 Average operatingassets $ 875,000
This year, the company has a $350,000 investment opportunitywith the following cost and revenue characteristics:
Sales $ 560,000 Contribution marginratio 70 % of sales Fixed expenses $ 336,000
The companyâs minimum required rate of return is 15%.
12. What is the residual income of this yearâs investmentopportunity?
13. If the company pursues the investment opportunity andotherwise performs the same as last year, what residual income willit earn this year?
[The following information applies to the questionsdisplayed below.]
Westerville Company reported the following results from lastyearâs operations: |
| Sales | $ | 1,400,000 |
| Variableexpenses | 720,000 | |
| Contributionmargin | 680,000 | |
| Fixed expenses | 470,000 | |
| Net operatingincome | $ | 210,000 |
| Average operatingassets | $ | 875,000 |
This year, the company has a $350,000 investment opportunitywith the following cost and revenue characteristics: |
| Sales | $ | 560,000 | |
| Contribution marginratio | 70 | % of sales | |
| Fixed expenses | $ | 336,000 | |
| The companyâs minimum required rate of return is 15%.
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Related questions
[The following information applies to the questionsdisplayed below.]
Westerville Company reported the following results from lastyearâs operations: |
| Sales | $ | 1,500,000 |
| Variableexpenses | 730,000 | |
| Contributionmargin | 770,000 | |
| Fixed expenses | 470,000 | |
| Net operatingincome | $ | 300,000 |
| Average operatingassets | $ | 937,500 |
This year, the company has a $362,500 investment opportunitywith the following cost and revenue characteristics: |
| Sales | $ | 580,000 | |
| Contribution marginratio | 70 | % of sales | |
| Fixed expenses | $ | 319,000 | |
| The companyâs minimum requiredrate of return is 10%. | ||||||||||
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Westerville Company reported the following results from lastyearâs operations: |
| Sales | $ | 1,500,000 |
| Variableexpenses | 500,000 | |
| Contributionmargin | 1,000,000 | |
| Fixed expenses | 700,000 | |
| Net operatingincome | $ | 300,000 |
| Average operatingassets | $ | 1,000,000 |
This year, the company has a $200,000 investment opportunitywith the following cost and revenue characteristics: |
| Sales | $ | 300,000 | |
| Contribution marginratio | 60 | % of sales | |
| Fixed expenses | $ | 132,000 | |
| The companyâs minimum required rate of return is 10%. 1.What is last yearâs margin? 2.What is last yearâs turnover? (Round your answer to 1decimal place.) 3.What is last yearâs return on investment (ROI)? 4.What is the margin related to this yearâs investmentopportunity? 5.What is the turnover related to this yearâs investmentopportunity? (Round your answer to 1 decimalplace.) 6.What is the ROI related to this yearâs investmentopportunity? 7.
8.
9.f the company pursues the investment opportunity and otherwiseperforms the same as last year, what ROI will it earn this year?(Round your percentage answer to 1 decimal place (i.e .1234should be entered as 12.3)) 10.
11.What is last yearâs residual income? 12.What is the residual income of this yearâs investmentopportunity? 13.f the company pursues the investment opportunity andotherwise performs the same as last year, what residual income willit earn this year? 14.
15.
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Westerville Company reported the following results from lastyearâs 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 opportunitywith the following cost and revenue characteristics:
Sales $ 260,000 Contribution margin ratio 80 % of sales
Fixed expenses $ 182,000
The companyâs minimum required rate of return is 15%.
| 1.If the company pursues the investment opportunity andotherwise performs the same as last year, what margin will it earnthis year? (Round your percentage answer to 1 decimal place(i.e .1234 should be entered as 12.3))Margin______________%
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