Required informatio [The following information applies to the questions displaye

Question

Required informatio [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations Sales Variable expenses Contribution margin Fixed expenses Net operating income 1,600,000 700,000 900,000 660,000 $240,000 Average operating assets $ 1,000,000 At the beginning of this year, the company has a $325,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses 520,000 70% of sales 312,000 The company's minimum required rate of return is 15%.

Explanation / Answer

1) Margin = 240000*100/1600000 = 15%

2) Turnover = 1600000/1000000 = 1.6

3) ROI = 240000*100/1000000 = 24%

4) Margin = (520000*70%-312000)*100/520000 = 10%

5) Turnover = 520000/325000 = 1.6

6) ROI = 52000*100/325000 = 16%

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