The following information applies to the questions displayed below.] Westerville

Question

The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations Sales Varlable expenses $1,500,000 650,000 Contribution margin Flxed expenses 850,000 580,000 Net operating Income $ 270,000 Average operating assets $1,000,000 This year, the company has a $160,000 Investment opportunity with the following cost and revenue characterlstics $240,000 Sales Contribution margin ratio Flxed expenses 70 % of sales $144,000 The company's minimum required rate of return is 10%.

Explanation / Answer

Question - 1 ........ what is last year's margin

Margin = Net operating income / sales * 100 = 270,000 / 1500,000 * 100 = 18 % ..................final answer

Question - 2 .........What is last years Turnover

Turnover = Sales / Assets = 1500,000 / 1000,000 = 1.5.............final answer

Question - 3 ........What is last years return on investment

ROI = Margin * turnover = 18*1.5 = 27 % ................. final answer

Question - 4

Margin = Net operating income / sales * 100 = 24000/240000 * 100 = 10% .............final answer

Sales 240,000 Variable cost = 30% of 240000 72000 Contribution 168,000 Fixed cost 144000 Net operating income 24,000

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