Question

In: Accounting

7-7 Westerville Company reported the following results from last year’s operations: Sales $ 1,500,000 Variable expenses...

7-7

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

Sales $ 1,500,000
Variable expenses 690,000
Contribution margin 810,000
Fixed expenses 435,000
Net operating income $ 375,000
Average operating assets $ 1,250,000

At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics:

Sales $ 420,000
Contribution margin ratio 70 % of sales
Fixed expenses $ 252,000

The company’s minimum required rate of return is 10%.

If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

____%

Solutions

Expert Solution

Computation the total accumulated profit margin percentage for this year is:

Total accumulated profit margin percentage for this year = (Total value of operating income of this year / Total value of sales of this year) * 100

= ($417,000 / $1,920,000) * 100

= 0.217 * 100

= 21.7%

Hence, the total accumulated profit margin percentage for this year is 21.7%.

Working notes:

1.

Computation the value of variable costs is:

Value of variable costs = Value of sales * (1 - Percentage of contribution margin)

= $420,000 * (1 - 0.70)

= $420,000 * 0.30

= $126,000

Hence, the value of variable costs is $126,000.

2.

Computation the value of contribution margin is:

Value of contribution margin = Value of sales - Value of variable costs

= $420,000 - $126,000

= $294,000

Hence, the value of contribution margin is $294,000.

3.

Computation the value of operating income of this year is:

Value of operating income of this year = Value of contribution margin - Value of fixed costs

= $294,000 - $252,000

= $42,000

Hence, the value of operating income of this year is $42,000.

4.

Computation the total value of operating income of this year is:

Total value of operating income of this year = Value of operating income of last year + Value of operating income of this year

= $375,000 + $42,000

= $417,000

Hence, the total value of operating income of this year is $417,000.

5.

Computation the total value of sales of this year is:

Total value of sales of this year = Value of sales of last year + Value of sales of this year

= $1,500,000 + $420,000

= $1,920,000

Hence, the total value of sales of this year is $1,920,000.

ekkarill92 answered 10 months ago
Next > < Previous

Related Solutions

Westerville Company reported the following results from last year’s operations: Sales $ 1,500,000 Variable expenses 500,000...
Westerville Company reported the following results from last year’s operations: Sales $ 1,500,000 Variable expenses 500,000 Contribution margin 1,000,000 Fixed expenses 700,000 Net operating income $ 300,000 Average operating assets $ 1,000,000 At the beginning of this year, the company has a $200,000 investment opportunity with the following cost and revenue characteristics: Sales $ 300,000 Contribution margin ratio 60 % of sales Fixed expenses $ 132,000 The company’s minimum required rate of return is 10%. What is the residual income...
Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 720,000...
Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 720,000 Contribution margin 680,000 Fixed expenses 470,000 Net operating income $ 210,000 Average operating assets $ 875,000 At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics: Sales $ 560,000 Contribution margin ratio 70 % of sales Fixed expenses $ 336,000 The company’s minimum required rate of return is 15%. Required 1. What is the...
Westerville Company reported the following results from last year’s operations:   Sales $ 1,200,000       Variable expenses 420,000...
Westerville Company reported the following results from last year’s operations:   Sales $ 1,200,000       Variable expenses 420,000       Contribution margin 780,000       Fixed expenses 600,000       Net operating income $ 180,000       Average operating assets $ 600,000     This year, the company has a $137,500 investment opportunity with the following cost and revenue characteristics:   Sales $ 220,000   Contribution margin ratio 60 % of sales   Fixed expenses $ 99,000 The company’s minimum required rate of return is 20%. rev: 04_28_2016_QC_CS-49731 1. value: 1.00...
Westerville Company reported the following results from last year’s operations: Sales $ 2,300,000 Variable expenses 670,000...
Westerville Company reported the following results from last year’s operations: Sales $ 2,300,000 Variable expenses 670,000 Contribution margin 1,630,000 Fixed expenses 1,170,000 Net operating income $ 460,000 Average operating assets $ 1,437,500 At the beginning of this year, the company has a $287,500 investment opportunity with the following cost and revenue characteristics: Sales $ 460,000 Contribution margin ratio 50 % of sales Fixed expenses $ 161,000 The company’s minimum required rate of return is 15%. 6. What is the ROI...
Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 720,000...
Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 720,000 Contribution margin 680,000 Fixed expenses 470,000 Net operating income $ 210,000 Average operating assets $ 875,000 At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics: Sales $ 560,000 Contribution margin ratio 70 % of sales Fixed expenses $ 336,000 The company’s minimum required rate of return is 15%. 1. What is the residual...
Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 680,000...
Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 680,000 Contribution margin 720,000 Fixed expenses 440,000 Net operating income $ 280,000 Average operating assets $ 875,000 At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics: Sales $ 480,000 Contribution margin ratio 80 % of sales Fixed expenses $ 336,000 The company’s minimum required rate of return is 15%. 1.  If the company pursues the...
Westerville Company reported the following results from last year’s operations: Sales $ 1,800,000 Variable expenses 740,000...
Westerville Company reported the following results from last year’s operations: Sales $ 1,800,000 Variable expenses 740,000 Contribution margin 1,060,000 Fixed expenses 700,000 Net operating income $ 360,000 Average operating assets $ 1,200,000 This year, the company has a $400,000 investment opportunity with the following cost and revenue characteristics: Sales $ 600,000 Contribution margin ratio 60 % of sales Fixed expenses $ 288,000 The company’s minimum required rate of return is 10%. 8. If the company pursues the investment opportunity and...
Westerville Company reported the following results from last year’s operations:   Sales $ 2,000,000       Variable expenses 640,000...
Westerville Company reported the following results from last year’s operations:   Sales $ 2,000,000       Variable expenses 640,000       Contribution margin 1,360,000       Fixed expenses 860,000       Net operating income $ 500,000       Average operating assets $ 1,250,000     This year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics:   Sales $ 400,000   Contribution margin ratio 70 % of sales   Fixed expenses $ 220,000 The company’s minimum required rate of return is 10%. 6. What is the ROI...
Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 510,000...
Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 510,000 Contribution margin 890,000 Fixed expenses 610,000 Net operating income $ 280,000 Average operating assets $ 875,000 At the beginning of this year, the company has a $175,000 investment opportunity with the following cost and revenue characteristics: Sales $ 280,000 Contribution margin ratio 50 % of sales Fixed expenses $ 98,000 The company’s minimum required rate of return is 15%. 1-1.  What is last year’s margin?...
Westerville Company reported the following results from last year’s operations: Sales $ 2,300,000 Variable expenses 670,000...
Westerville Company reported the following results from last year’s operations: Sales $ 2,300,000 Variable expenses 670,000 Contribution margin 1,630,000 Fixed expenses 1,170,000 Net operating income $ 460,000 Average operating assets $ 1,437,500 At the beginning of this year, the company has a $287,500 investment opportunity with the following cost and revenue characteristics: Sales $ 460,000 Contribution margin ratio 50 % of sales Fixed expenses $ 161,000 The company’s minimum required rate of return is 15%. 12a. What is the residual...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT