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
What is last year’s
If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?
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%.
If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?
If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps
- The Millard Division's operating data for the past two years are provided below: Return on investment Net operating income Turnover Margin Sales Year 1 12% Year 2 36% ? $ 480,000 ? 3 ? ? $ 3,260,000 ? Millard Division's margin in Year 2 was 150% of the margin in Year 1. The net operating income for Year 1 was: (Round your intermediate percentage calculations to the nearest whole percent.) Multiple Choice $320,000 $260,800 $391,200 $782,400arrow_forwardA firm operated at 80% of capacity for the past year, during which fixed costs were $190,000, variable costs were 65% of sales, and sales were $976,000. Operating profit was a. $151,600 Ob. $634,400 OC. $121,280 d. $341,600 ?arrow_forwardPlease help me with all answers thankuarrow_forward
- The company had an overall return on investment (ROI) of 15% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $1,000,000. The cost and revenue characteristics of the new product line per year would be: Sales $2,000,000 Variable expenses 60% of sales Fixed expenses $640,000 Required: 1. Compute the Office Products Division's margin, turnover, and ROI for this year. 2. Compute the Office Products Division's margin, turnover, and ROI for the new product line by itself. 3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming that it performs the same as this year and adds the new product line. 4. If you were in Dell Havasi's position, would you accept or reject the new product line? Explain. 5. Why do you suppose headquarters is anxious for the Office Products Division to add the new product…arrow_forwardSw.arrow_forwardLast year's contribution format income statement for Huerra Company is given below: Unit $ 49.60 29.76 19.84 15.74 Sales Variable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 40% Net income The company had average operating assets of $496,000 during the year. Required: 1. Compute last year's margin, turnover, and return on investment (ROI). For each of the following questions, indicate whether last year's margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI. Consider each question separately. 2. Using Lean Production, the company is able to reduce the average level of inventory by $95,000. 3. The company achieves a cost savings of $11,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increase average operating assets by $124,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per…arrow_forward
- Required information Skip to question [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: Sales $ 1,500,000 Variable expenses 730, 000 Contribution margin 770, 000 Fixed expenses 470,000 Net operating income $ 300,000 Average operating assets $ 937,500 At the beginning of this year, the company has a $362, 500 investment opportunity with the following cost and revenue characteristics: Sales $ 580,000 Contribution margin ratio 70% of sales Fixed expenses $ 319,000 The company's minimum required rate of return is 10%. 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.)arrow_forwardWaffle Fries are Heavenly (WFH) has the following financial information for the previous year of operations: Operating income $128,000 Invested assets $800,000 Sales $296,000 WFH has internally set the minimum acceptable rate of return as 15%. Based on the information provided, what is the residual income? Waffle Fries are Heavenly (WFH) has the following financial information for the previous year of operations: Operating income $128,000 Invested assets $800,000 Sales $296,000 WFH has internally set the minimum acceptable rate of return as 15%. Based on the information provided, what is the residual income? $8,000 $83,600 $176 $128,000arrow_forwardWesterville 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 $ 480,000 $ 336,000 The company's minimum required rate of return is 15%. $ 1,400,000 680,000 720,000 440,000 $ 280,000 $ 875,000 Contribution margin ratio Fixed expenses 9. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year? (Do not round intermediate calculations. Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 37.3 % 80% of salesarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education