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%. 1. What is the turnover related to this year’s investment opportunity? round answer to 1 decimal 2. What is last year’s residual income? 3. What is the residual income of this year’s investment opportunity?
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%. 1. What is the turnover related to this year’s investment opportunity? round answer to 1 decimal 2. What is last year’s residual income? 3. What is the residual income of this year’s investment opportunity?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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
1. What is the turnover related to this year’s investment opportunity? round answer to 1 decimal
2. What is last year’s residual income?
3. What is the residual income of this year’s investment opportunity?
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