Westerville Company reported the following results from last year’s operations:

Question

Westerville Company reported the following results from last year’s operations:

At the beginning of this year, the company has a $287,500 investment opportunity with the following cost and revenue characteristics:

The company’s minimum required rate of return is 15%.

Required:

1a. What is last year’s margin?

1b. What is last year’s turnover? (Round your answer to 1 decimal place.)

1c. What is last year’s return on investment (ROI)? (Round your intermediate calculations to 1 decimal place.)

1d. What is the margin related to this year’s investment opportunity?

1e. What is the turnover related to this year’s investment opportunity? (Round your answer to 1 decimal place.)

Sales $ 2,300,000 Variable expenses 670,000 Contribution margin 1,630,000 Fixed expenses 1,170,000 Net operating income $ 460,000 Average operating assets $ 1,437,500

Explanation / Answer

a Margin = Net operating income/Sales = 460000/2300000= 20% b Turnover = Sales/Average operating assets = 2300000/1437500= 1.6 c Return on investment (ROI) = Margin*Turnover = 20%*1.6= 32% d Net operating income related to this year’s investment opportunity = (460000*50%)-161000= $69000 Margin related to this year’s investment opportunity = 69000/460000= 15% e Turnover related to this year’s investment opportunity = 460000/287500= 1.6

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.