Answer:
Westerville Company
1. Last year's margin is:
= 20%
2. Last year's turnover is:
= $1,800,000
3. Last year's ROI is:
= 30%
4. The margin related to this year's investment opportunity is:
= 10%
5. The turnover related to this year's investment opportunity is:
= $360,000.
6. The ROI related to this year's investment opportunity is:
= 12%
7. The margin this year is:
= 18.33%
8. The turnover that it will earn this year is:
= $2,160,000
9. The ROI that it will earn this year is:
= 26.4%
Explanation:
a) Data and Calculations:
                                              Last Year's          This Year's          Total 
Sales                                    $1,800,000           $360,000     $2,160,000
Variable expenses                  435,000              108,000          543,000
Contribution margin             1,365,000             252,000      $1,617,000
Fixed expenses                    1,005,000              216,000        1,221,000
Net operating income          $360,000             $36,000       $396,000
Average operating assets $1,200,000           $300,000    $1,500,000
Minimum Required Rate of Return = 10%
=                                             $120,000             $30,000       $150,000
1. Last year's margin = 20% ($360,000/$1,800,000) * 100
2. Last year's turnover = $1,800,000
3. Last year's ROI = 30% ($360,000/$1,200,000) * 100
4. The margin related to this year's investment opportunity is:
= 10% ($36,000/$360,000) * 100
5. The turnover related to this year's investment opportunity is $360,000.
6. The ROI related to this year's investment opportunity is:
12% ($36,000/$300,000)
7. The margin = 18.33% ($396,000/$2,160,000) * 100
8. The turnover that it will earn this year = $2,160,000
9. The ROI that it will earn this year = 26.4% ($396,000/$1,500,000) * 100