Required information[The following information applies to the questions displayed below.]Westerville Company reported the following results from last year's operations:SalesVariable expensesContribution marginFixed expensesNet operating income$ 1,400,000680,000720,000440,000$ 280,000Average operating assets$ 875,000At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenuecharacteristics:Sales$ 480,000Contribution margin ratio80 % of sales$ 336,000Fixed expensesThe company's minimum required rate of return is 15%.13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earnthis year?Residual income

Step 1: Calculate Expected Sales and Profits for This YearFirst, let's calculate the expected sales,…

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Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 21BEB

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Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year: At the beginning of last year, Elway had 28,300,000 in operating assets. At the end of the year, Elway had 23,700,000 in operating assets. Required: 1. Compute average operating assets. 2. Compute the margin and turnover ratios for last year. (Note: Round the answer for margin ratio to two decimal places.) 3. Compute ROI. (Note: Round answer to two decimal places.) 4. CONCEPTUAL CONNECTION Briefly explain the meaning of ROI. 5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company).
The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your findings in part C.
The income statement comparison for Forklift Material Handling shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the return on investment. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the residual income for each year. Explain how this compares to your findings in part C.
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. A. In the correct format, prepare the income statement using the following information: B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $100,000 and 6% cost of capital. C. Prepare a short response to accompany the income statement that explains why uncontrollable costs are included in the income statement.
Required information [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses $ 1,750, 000 520,000 1, 230, 000 880, 000 Net operating income %24 350, 000 Average operating assets 24 875, 000 At the beginning of this year, the company has a $200,000 investment opportunity with the following cost and revenue characteristics: Sales $ 320, 000 Contribution margin ratio Fixed expenses 60% of sales $ 128, 000 The company's minimum required rate of return is 20%. 4. What is the margin related to this year's investment opportunity? Margin Drov
Required information [The following information applies to the questions displayed below] Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets ROI At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics: Sales $ 1,800,000 435,000 1,365,000 1,005,000 $360,000 $ 1,200,000 $360,000 $ 216,000 The company's minimum required rate of return is 10% Contribution margin ratio Fixed expenses 70 of sales. 6. What is the ROI related to this year's investment opportunity?
i Requlred Informatlon The following information applies to the questions displayed below] Westerville Company reported the following results from last year's operations: $ 2,300,000 Contribution margin Fixed expenses 1,170,000 Net operating income Average operating assets S1,437,500 At the beginning of this year, the company has a $287,500 investment opportunity with the following cost and revenue characteristics: Sales $ 460,000 50% of sales Contribution margin ratio Fixed expenses, $ 161,000 The company's minimum required rate of return is 15%. 8. If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? (Round your answer to 2 decimal places.) < Prev Next 15. here to search, 近。 F4 F5 F7 F8 F12 $ & V 4.
Required information [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses $ 1,600,000 700,000 900,000 660,000 Net operating income 24 240,000 Average operating assets $1,000,000 At the beginning of this year, the company has a $325,000 investment opportunity with the fol characteristics: $ 520,000 Sales Contribution margin ratio Fixed expenses 70 % of sales $ 312,000 The company's minimum required rate of return is 15%. 4. What is the margin related to this year's investment opportunity? Margin % ( Prev Ps Ai Pr re to search
Required information [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses $1,600,000 700,000 900,000 660,000 Net operating income 240,000 Average operating assets $ 1,000,000 At the beginning of this year, the company has a $325,000 investment opportunity with the follo characteristics: $ 520,000 Sales Contribution margin ratio Fixed expenses 70 % of sales $ 312,000 The company's minimum required rate of return is 15%. 13. If the company pursues the investment opportunity and otherwise performs the same as last year, what re this year? Residual income < Prev 13 14 1O Pr Ps o search SUS
Required information [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses $ 1,600,000 700,000 900,000 660,000 Net operating income $4 240,000 Average operating assets $ 1,000,000 At the beginning of this year, the company has a $325,000 investment opportunity with the characteristics: Sales Contribution margin ratio Fixed expenses $ 520,000 70 % of sales $ 312,000 The company's minimum required rate of return is 15%. 9. If the company pursues the investment opportunity and otherwise performs the same as last year, wha (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%.)) ROI % ( Prev 1O Pr Ps to search RELS
Required information [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $ 1,400,000 680,000 720,000 440,000 $ 280,000 $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 Fixed expenses 80 % of sales $ 336,000 The company's minimum required rate of return is 15%. 11. What is last year's residual income? Residual income
Required information [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $ 1,400,000 680,000 720,000 440,000 $ 280,000 $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 $ 336,000 Fixed expenses The company's minimum required rate of return is 15%. 8. If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? Note: Round your answer to 2 decimal places. Turnover

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