Question

Canedo Incorporated reported the following results from last year’s operations: Sales $ 9,600,000 Variable expenses 7,170,000 Contribution margin 2,430,000 Fixed expenses 1,470,000 Net operating income $ 960,000 Average operating assets $ 4,000,000 At the beginning of this year, the company has a $700,000 investment opportunity with the following characteristics: Sales $ 2,310,000 Contribution margin ratio 60% of sales Fixed expenses $ 1,201,200 If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:

Answer 1

Answer:

2.53

Explanation:

The computation of the combined turnover for the entire company is shown below;

Combined turnover is

= Combined sales ÷ combined assets

where,

Combined sales is

= $9,600,000 + $2,310,000

= $11,910,000

And,

Combined Assets is

= $4,000,000 + $700,000

= $4,700,000

So, Combined Turnover is

= $11,910,000 ÷ 4,700,000

= 2.53