Question

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 .1234 should be entered as 12.3))

Answer 1

Missing part of question

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

Sales $1,400,000

Variable expenses 680,000

Contribution margin 720,000

Fixed expenses 440,000

Net operating income $280,000

Average operating assets $875,000

This year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics:

Answer:

Margin = 20.00%

Explanation:

Margin refers to the difference between the seller's cost for acquiring products and the selling price

Margin Is calculated by Net Operating Income ÷ Sales

Given that Net Operating Income = $280,000 and

Sales = $1,400,00 (Fromm the question)

Calculating Net Operating Income

By substituton

= $280,000/$1,400,000 ---- divid

Net Operating Income = 0.2 ---- convert to percentage

Net Operating Income = 20%

Hence the net operating income is 20%