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

Question

Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution marain Fixed expenses Net operating income $2,000,000 640,000 1,360,000 860,000 $500,000 Average operating assets 1,250,000 At the beginning of this year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics Sales Contribution margin ratio Fixed expenses $400,000 70% of sales 220,000 The company's minimum required rate of return is 10%.

Explanation / Answer

12)

13)

Sales $     400,000 Contribution $     280,000 Less: Fixed expenses $     220,000 Operating Income $        60,000 Less: Required return (250000*10%) $        25,000 Residual Income $        35,000

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