Westerville Company reported the following results from last year’s operations: Sales $ 1,400,000 Variable expenses 510,000 Contribution margin 890,000 Fixed expenses 610,000 Net operating income $ 280,000 Average operating assets $ 875,000 At the beginning of this year, the company has a $175,000 investment opportunity with the following cost and revenue characteristics: Sales $ 280,000 Contribution margin ratio 50 % of sales Fixed expenses $ 98,000 The company’s minimum required rate of return is 15%. Foundational 11-8 (Algo) 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.)
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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The Foundational 15 (Algo) [LO11-1, LO11-2]
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Westerville Company reported the following results from last year’s operations:
| Sales | $ | 1,400,000 |
| Variable expenses | 510,000 | |
| Contribution margin | 890,000 | |
| Fixed expenses | 610,000 | |
| Net operating income | $ | 280,000 |
| Average operating assets | $ | 875,000 |
At the beginning of this year, the company has a $175,000 investment opportunity with the following cost and revenue characteristics:
| Sales | $ | 280,000 | |
| Contribution margin ratio | 50 | % of sales | |
| Fixed expenses | $ | 98,000 | |
The company’s minimum required
Foundational 11-8 (Algo)
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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