he following information applies to the questions displayed below.] Westerville
ID: 2463289 • Letter: H
Question
he following information applies to the questions displayed below.] Westerville Company reported the following results from last year’s operations: Sales $ 2,000,000 Variable expenses 640,000 Contribution margin 1,360,000 Fixed expenses 860,000 Net operating income $ 500,000 Average operating assets $ 1,250,000 This year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics: Sales $ 400,000 Contribution margin ratio 70 % of sales Fixed expenses $ 220,000 The company’s minimum required rate of return is 10%. 1.value: 0.50 pointsRequired information Required: 1. What is last year’s margin? ReferenceseBook & Resources WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses. Check my work 2.value: 0.50 pointsRequired information 2. What is last year’s turnover? (Round your answer to 1 decimal place.) ReferenceseBook & Resources WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses. Check my work 3.value: 0.50 pointsRequired information 3. What is last year’s return on investment (ROI)? ReferenceseBook & Resources WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses. Check my work 4.value: 0.50 pointsRequired information 4. What is the margin related to this year’s investment opportunity? ReferenceseBook & Resources WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses. Check my work 5.value: 0.50 pointsRequired information 5. What is the turnover related to this year’s investment opportunity? (Round your answer to 1 decimal place.) ReferenceseBook & Resources WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses. Check my work 6.value: 0.50 pointsRequired information 6. What is the ROI related to this year’s investment opportunity? ReferenceseBook & Resources WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses. Check my work 7.value: 0.50 pointsRequired information 11. What is last year’s residual income? ReferenceseBook & Resources WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses. Check my work 8.value: 0.50 pointsRequired information 12. What is the residual income of this year’s investment opportunity?
Explanation / Answer
Answer:1 Last year Margin:=(Net operating income/Sales)*100
=(500000/2000,000)*100=25%
Answer:2 last year’s turnover=(Sales/Average operating assets)
=(2000000/1250000)=1.6 times
Answer:3 ROI=Margin*turnover
=25%*1.6
=40%
Answer:4 Margin related to this year=(60000/400000)*100=15%
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