Westerville Company reported the following results from last year’s operations: Sales $1,800,000 Variable expenses 435,000 Contribution margin 1,365,000 Fixed expenses 1,005,000


Westerville Company reported the following results from last year’s operations:
Sales $1,800,000
Variable expenses 435,000
Contribution margin 1,365,000
Fixed expenses 1,005,000
Net operating income $360,000
Average operating assets $1,200,000
At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics:
Sales $360,000
Contribution margin ratio 70% of sales
Fixed expenses $216,000
The company’s minimum required rate of return is 10%.
1. What is last year’s margin?
2. What is last year’s turnover?
3. What is last year’s ROI?
4. What is the margin related to this year’s investment opportunity?
5. What is the turnover related to this year’s investment opportunity?
6. What is the ROI related to this year’s investment opportunity?
7. If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?
8. If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?
9. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?


Leave a Reply

Your email address will not be published.