Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 1,600,000 700,000 900,000 660,000 $ 240,000 Average operating assets $ 1,000,000 At the beginning of this year, the company has a $325,000 investment opportunity with the following cost and revenue characteristics: Sales $520,000 Contribution margin ratio 70 % of sales $ 312,000 Fixed expenses The company's minimum required rate of return is 15%. 14. If Westerville's chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? ○ Yes No

Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 1,600,000 700,000 900,000 660,000 $ 240,000 Average operating assets $ 1,000,000 At the beginning of this year, the company has a $325,000 investment opportunity with the following cost and revenue characteristics: Sales $520,000 Contribution margin ratio 70 % of sales $ 312,000 Fixed expenses The company's minimum required rate of return is 15%. 14. If Westerville's chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? ○ Yes No

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).
Division A of Kern Co. has sales of $350,000, cost of goods sold of $200,000, operating expenses of $30,000, and invested assets of $600000. What is the return on investment for Division A? A. 20% B. 25% C. 33% D. 40%
During the current year, Plainfield Manufacturing earned income of $845,000 from total sales of $9,350,000 and average capital assets of $13,500,000. Using the sales margin from the previous exercise, what is the total ROI for the company during the current year?
During the current year, Sokowski Manufacturing earned income of $350,000 from total sales of $5,500,000 and average capital assets of $12,000, 000. What is the sales margin?
Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: It is expected that 21,875 units will be sold at a price of 160 a unit. Maximum sales within the relevant range are 27,000 units. Instructions Prepare an estimated income statement for 20Y3. What is the expected contribution margin ratio? Determine the break-even sales in units and dollars. Construct a cost-volume-profit chart indicating the break-even sales. What is the expected margin of safety in dollars and as a percentage of sales? Determine the operating leverage. It is expected that 12,000 units will be sold a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions Prepare an estimated income statement for 20Y7. What is the expected contribution margin ratio? Determine the break-even sales in units and dollars. Construct a cost-volume-profit chart indicating the break-even sales. What is the expected margin of safety in dollars and as a percentage of sales? Determine the operating leverage.
Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: It is expected that 12,000 units will be sold at a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to one decimal place.) 6. Determine the operating leverage.
During the current year. Plainfield Manufacturing earned income of $845,000 from total sales of $9,350,000 and average capital assets of $13,500,000. What is the sales margin?
Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses Margin $ 1,400,000 680,000 720,000 440,000 $ 280,000 $ 875,000 $ 480,000 $ 336,000 The company's minimum required rate of return is 15%. 7. 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).) % 80% of sales
Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $1,400,000 680,000 720,000 440,000 $ 280,000 $ 875,000 $ 480,000 $ 336,000 The company's minimum required rate of return is 15%. Residual income 80% of sales 13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?
Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $ 1,400,000 720,000 680,000 470,000 $ 210,000 $ 875,000 $ 560,000 $ 336,000 The company's minimum required rate of return is 15%. Turnover 70% of sales 5. What is the turnover related to this year's investment opportunity? (Round your answer to 1 decimal place.)
[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 At the beginning of this year, the company has a $162,500 investment opportunity with the following cost and revenue characteristics: Sales $ 1,300,000 440,000 860,000 600,000 $ 260,000 $ 812,500 Contribution margin ratio Fixed expenses $ 260,000 80 % of sales $ 182,000 The company's minimum required rate of return is 15%. 2. What is last year's turnover? Note: Round your answer to 1 decimal place.
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