Required information The following information applies to the questions displaye

Question

Required information 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 Average operating assets 937,500 $ 1,500,000 730,000 770,000 470,000 $ 300,000 At the beginning of this year, the company has a $362,500 investment opportunity with the following cost and revenue characteristics Sales Contribution margin ratio Fixed expenses $ 580,000 70 % of sales 319,000 The company's minimum required rate of return is 10%

Explanation / Answer

1) Last year's margin = 300000*100/1500000 = 20%

2) Turnover = 1500000/937500 = 1.6

3) ROI = 300000*100/937500 = 32%

4) Net income = (580000*70%-319000) = 87000

Margin = 87000*100/362500 = 24%

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