Question

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

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

Sales	$	2,200,000
Variable expenses		660,000
Contribution margin		1,540,000
Fixed expenses		1,100,000
Net operating income	$	440,000
Average operating assets	$	1,375,000

This year, the company has a $275,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	440,000
Contribution margin ratio		60	% of sales
Fixed expenses	$	220,000

The company’s minimum required rate of return is 15%.

rev: 04_28_2016_QC_CS-49731

1.

value:
0.50 points

Required information

Required:

1.	What is last year’s margin?

     

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

2.

value:
0.50 points

Required information

2.	What is last year’s turnover? (Round your answer to 1 decimal place.)

      

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

3.

value:
0.50 points

Required information

3.	What is last year’s return on investment (ROI)?

       

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

4.

value:
0.50 points

Required information

4.	What is the margin related to this year’s investment opportunity?

      

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

5.

value:
0.50 points

Required information

5.	What is the turnover related to this year’s investment opportunity? (Round your answer to 1 decimal place.)

      

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

6.

value:
0.50 points

Required information

6.	What is the ROI related to this year’s investment opportunity?

      

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

7.

value:
0.50 points

Required information

11.	What is last year’s residual income?

      

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

8.

value:
0.50 points

Required information

12.	What is the residual income of this year’s investment opportunity?

      

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 Medium

Answer 1