Question: Westerville Company reported the following results from last year's operations: Sales $1,200,000 Variable expenses 320,000 Contribution margin 880,000 Fixed expenses 640,000 Net operating income $240,000 Average operating assets $600,000 At the beginning of this year, the company has a $150,000 investment opportunity with the following cost and revenue characteristics: Sales $240,000 Contribution margin ratio 50 % of sales Fixed expenses $84,000 The company's minimum required rate of return is 15%. What was last year's margin?

Question: Westerville Company reported the following results from last year's operations: Sales $1,200,000 Variable expenses 320,000 Contribution margin 880,000 Fixed expenses 640,000 Net operating income $240,000 Average operating assets $600,000 At the beginning of this year, the company has a $150,000 investment opportunity with the following cost and revenue characteristics: Sales $240,000 Contribution margin ratio 50 % of sales Fixed expenses $84,000 The company's minimum required rate of return is 15%. What was last year's margin?

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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Question:

Westerville Company reported the following results from last year's operations:

Sales	$1,200,000
Variable expenses	320,000
Contribution margin	880,000
Fixed expenses	640,000
Net operating income	$240,000
Average operating assets	$600,000

At the beginning of this year, the company has a $150,000 investment opportunity with the following cost and revenue characteristics:

Sales	$240,000
Contribution margin ratio	50 % of sales
Fixed expenses	$84,000

The company's minimum required rate of return is 15%.

What was last year's margin?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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