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
