Saved Help Save & Exit Subr Week #12 Chapter 11 9 Required informatiorn The foll

Question

Saved Help Save & Exit Subr Week #12 Chapter 11 9 Required informatiorn The following information applies to the questions displayed below Westerville Company reported the following results from last year's operations: Part 7 of t2 Sales Variable expenses Fixed expenses Net operating income Average operating assets$ 625,000 $1,000,000 0.5 points 00,000 500,000 5 200,000 At the beginning of this year, the company has a $120,000 investment opportunity with the following cost and revenue characteristics Print Sales Contribution margin ratio Fixed expenses 200,000 60 % of sales Reerences 90,000 The company's minimum required rate of return is 15%. 7. If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year? Round your percentage answer to 1 decimal place)

Explanation / Answer

Ans.1 Margin 19.2% *Calculation: Margin = Total operating income / Total sales * 100 230000 / 1200000 * 100 19.2% *Total opearting income = Operating income of last year + operating income of current year Last year 200000 Current year 30000 Total income 230000 *Current year operating income = (Sales * Contribution margin) - Fixed expenses (200000 * 60%) - 90000 120000 - 90000 30000 *Total sales = Sales of last year + sales of current year Last year 1000000 Current year 200000 Total sales 1200000 Ans.2 Turnover 1.61 *Calculation: Turnover = Total sales / Total average opearting assets 1200000 / 745000 1.61 *Total sales = Sales of last year + sales of current year Last year 1000000 Current year 200000 Total sales 1200000 *Total aveage opearting assets Last year 625000 Current year 120000 Total investment or assets 745000

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