Question

The Foundational 15 [LO10-1, LO10-2] [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year’s operations: Sales $ 2,300,000 Variable expenses 670,000 Contribution margin 1,630,000 Fixed expenses 1,170,000 Net operating income $ 460,000 Average operating assets $ 1,437,500 At the beginning of this year, the company has a $287,500 investment opportunity with the following cost and revenue characteristics: Sales $ 460,000 Contribution margin ratio 50 % of sales Fixed expenses $ 161,000 The company’s minimum required rate of return is 15%. Foundational 10-4 4. What is the margin related to this year’s investment opportunity?

Answer 1

Answer:

Margin = 1%

Explanation:

To calculate the margin related to these year investment opportunity, we use the following method.

Margin = net operating income/ sales

Margin = $460,000/ $ 460,000

Margin = 1%