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

this year contribution 240,000*70%= 168000 less:Fixed expense -144,000 Net operating income 24000 5) Turnover = sales/average operating assets                   = 240,000/160,000 1.5 6) ROI          = net income/average operating assets                     24,000/160,000 15.00% 7) Margin = net income/average operating assets                 = 294,000/1,160,000 25.3% 8) Turnover = sales/average operating assets 1,740,000/1,160,000 1.5

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