3.RequIred InformatlonThe following information applies to the questions displayed below.]Westerville Company reported the following results from last year's operations:$2,300,000SalesVariable expensesContribution marginFixed expenses1,170,000Net operating incomeAverage operating assets$ 1,437,500At the beginning of this year, the company has a $287,500 investment opportunity with the following cost and revenuecharacteristics:50% of salesContribution margin ratioFixed expenses$4161,000The company's minimum required rate of return is 15%.7. If the comnpany pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?< Prev15.of 15re to searchT12LF4F5F7F11

Net income on investment opportunity = (Sales * Contribution margin ratio) - Fixed expenses Net…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Calculating Residual Income East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales $3,750,000 Cost of goods sold 2,250,000 Gross margin $1,500,000 Selling and administrative expense 1,200,000 Operating income $ 300,000 Less: Income taxes (@ 40%) 120,000 Net income $ 180,000 At the beginning of the year, the value of operating assets was $1,600,000. At the end of the year, the value of operating assets was $1,400,000. East Mullett requires a minimum rate of return of 5%. What is the residual income?
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. Assume that the contribution margin ratio of the investment opportunity was 65% instead of 70%. 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 or no 2. Would the owners of the company want her to pursue the investment opportunity?
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 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.)
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Westerville Company reported the following results from last year’s operations: Sales $ 1,800,000 Variable expenses 740,000 Contribution margin 1,060,000 Fixed expenses 700,000 Net operating income $ 360,000 Average operating assets $ 1,200,000 At the beginning of this year, the company has a $400,000 investment opportunity with the following cost and revenue characteristics: Sales $ 600,000 Contribution margin ratio 60 % of sales Fixed expenses $ 288,000 The company’s minimum required rate of return is 10%. 6. What is the ROI related to this year’s investment opportunity? (Do not round intermediate calculations.) 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).) 8. If the company pursues the investment opportunity and otherwise performs the same as last year,…
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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? 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 $128,000
Elway Company provided the following income statement for the last year: Sales $714,390,000 Less: Variable expenses 557,689,000 Contribution margin $156,701,000 Less: Fixed expenses 195,362,000 Operating income $-38,661,000 At the beginning of last year, Elway had $38,657,000 in operating assets. At the end of the year, Elway had $41,360,000 in operating assets. Required: 1. Compute average operating assets.$fill in the blank 1 2. Compute the margin (as a percent) and turnover ratios for last year. If required, round your answers to two decimal places. Margin fill in the blank 2 % Turnover fill in the blank 3 3. Compute ROI as a percent. Use the part 2 final answers in these calculations and round the final answer to two decimal places.fill in the blank 4 % 4. ROI measures a company’s ability to generate relative to its investment in assets. The greater the ROI, the efficiently the company is generating from its assets. 5. CONCEPTUAL CONNECTION Comment…
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 $ 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 sales
Westerville Company reported the following results from last year’s operations: Sales $ 1,800,000 Variable expenses 740,000 Contribution margin 1,060,000 Fixed expenses 700,000 Net operating income $ 360,000 Average operating assets $ 1,200,000 At the beginning of this year, the company has a $400,000 investment opportunity with the following cost and revenue characteristics: Sales $ 600,000 Contribution margin ratio 60 % of sales Fixed expenses $ 288,000 The company’s minimum required rate of return is 10%. 2. What is last year’s turnover? (Round your answer to 1 decimal place.) 3. What is last year’s return on investment (ROI)? (Round your intermediate calculations to 1 decimal place.) 4. What is the margin related to this year’s investment opportunity? 5. What is the turnover related to this year’s investment opportunity? (Round your answer to 1 decimal place.)

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