Question

9) Youns Inc. reported the following results from last year's operations: Sales $ 10,500,000 Variable expenses 6,610,000 Contribution margin 3,890,000 Fixed expenses 3,260,000 Net operating income $ 630,000 The company's average operating assets were $5,000,000. At the beginning of this year, the company has a $1,400,000 investment opportunity that involves sales of $2,800,000, fixed expenses of $616,000, and a contribution margin ratio of 30% of sales. 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: A) 9.50 B) 1.64 C) 2.66 D) 2.08

Answer 1

Answer is D. 2.08
Explanation
		Current	Proposed	Total
Sales		10,500,000	2,800,000	13,300,000
less: Variable cost		6,610,000	1960000	8,570,000
Contribution margin		3,890,000	840,000	4,730,000
Less: Fixed cost		3260000	616000	3,876,000
Net income		630,000	224,000	854,000
Average operating assets		5,000,000	1,400,000	6,400,000
Assets turnover: Total sales revenue / Average Investment
		13300,000 /6400,000 = 2.08 times