Question

Westerville Company reported the following results from last
year’s operations:

Sales $ 1,500,000

Variable expenses 690,000

Contribution margin 810,000

Fixed expenses 435,000

Net operating income $ 375,000

Average operating assets $ 1,250,000

At the beginning of this year, the company has a $350,000
investment opportunity with the following cost and revenue
characteristics:

Sales $ 420,000

Contribution margin ratio 70 %
of sales

Fixed expenses $ 252,000

The company’s minimum required rate of return is 10%.

13. If the company pursues the investment opportunity and otherwise
performs the same as last year, what residual income will it earn
this year?

Answer #1

Answer- 13)- If the company pursues the investment opportunity and otherwise performs the same as last year, residual income will it earn this year = $257000.

Explanation= Residual income =Operating income– (Average operating assets*Required rate of return)

= $417000-($1600000*10%)

= $417000-$160000

= $257000

Where- Operating income = (Sales*Contribution margin ratio)-Fixed expenses

= ($420000*70%)-$252000

= $294000-$252000

= $42000

Total operating income = $375000+$42000

= $417000

Total average operating assets = $1250000+$350000

= $1600000

Westerville Company reported the following results from last
year’s operations:
Sales $ 1,500,000
Variable expenses 690,000
Contribution margin 810,000
Fixed expenses 435,000
Net operating income $ 375,000
Average operating assets $ 1,250,000
At the beginning of this year, the company has a $350,000
investment opportunity with the following cost and revenue
characteristics:
Sales $ 420,000
Contribution margin ratio 70 %
of sales
Fixed expenses $ 252,000
The company’s minimum required...

Westerville Company
reported the following results from last year’s operations:
Sales
$
1,500,000
Variable
expenses
500,000
Contribution
margin
1,000,000
Fixed
expenses
700,000
Net operating
income
$
300,000
Average
operating assets
$
1,000,000
At the beginning of
this year, the company has a $200,000 investment opportunity with
the following cost and revenue characteristics:
Sales
$
300,000
Contribution
margin ratio
60
% of sales
Fixed
expenses
$
132,000
The company’s minimum
required rate of return is 10%.
13. If the company
pursues...

Westerville Company
reported the following results from last year’s
operations:
Sales
$
1,500,000
Variable
expenses
730,000
Contribution
margin
770,000
Fixed
expenses
470,000
Net operating
income
$
300,000
Average
operating assets
$
937,500
This year, the company has
a $362,500 investment opportunity with the following cost and
revenue characteristics:
Sales
$
580,000
Contribution
margin ratio
70
% of sales
Fixed
expenses
$
319,000
The company’s minimum
required rate of return is 10%.
9.
If the company pursues...

Westerville Company reported the following results from last
year’s operations:Sales$1,400,000Variable expenses510,000Contribution margin890,000Fixed expenses610,000Net operating income$280,000Average operating assets$875,000At the beginning of this year, the company has a $175,000
investment opportunity with the following cost and revenue
characteristics:Sales$280,000Contribution margin ratio50% of salesFixed expenses$98,000The company’s minimum required rate of return is 15%.7. 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.,...

Westerville Company reported the following results from last
year’s operations:
Sales
$
2,000,000
Variable
expenses
640,000
Contribution
margin
1,360,000
Fixed expenses
860,000
Net operating
income
$
500,000
Average operating
assets
$
1,250,000
This year, the company has a $250,000 investment opportunity
with the following cost and revenue characteristics:
Sales
$
400,000
Contribution margin
ratio
70
% of sales
Fixed expenses
$
220,000
The company’s minimum required
rate of return is 10%.
Required:
1.
What is last...

Westerville Company reported the following results from last
year’s operations: Sales $ 1,200,000 Variable expenses 420,000
Contribution margin 780,000 Fixed expenses 600,000 Net operating
income $ 180,000 Average operating assets $ 600,000
________________________________________ At the beginning of this
year, the company has a $137,500 investment opportunity with the
following cost and revenue characteristics: Sales $ 220,000
Contribution margin ratio 60 % of sales Fixed expenses $ 99,000 The
company’s minimum required rate of return is 20%.
10-a. If Westerville’s chief...

Westerville Company
reported the following results from last year’s operations:
Sales
$
1,900,000
Variable
expenses
550,000
Contribution
margin
1,350,000
Fixed
expenses
875,000
Net operating
income
$
475,000
Average
operating assets
$
1,187,500
At the beginning of
this year, the company has a $237,500 investment opportunity with
the following cost and revenue characteristics:
Sales
$
380,000
Contribution
margin ratio
50
% of sales
Fixed
expenses
$
133,000
The company’s minimum
required rate of return is 10%.
1. What is last year’s...

[The following information applies to the questions displayed
below.] Westerville Company reported the following results from
last year’s operations: Sales $ 1,750,000 Variable expenses 520,000
Contribution margin 1,230,000 Fixed expenses 880,000 Net operating
income $ 350,000 Average operating assets $ 875,000 This year, the
company has a $200,000 investment opportunity with the following
cost and revenue characteristics: Sales $ 320,000 Contribution
margin ratio 60 % of sales Fixed expenses $ 128,000 The company’s
minimum required rate of return is 20%....

[The following information applies to the questions
displayed below.]
Westerville Company reported the following results from last
year’s operations:
Sales
$
2,200,000
Variable expenses
660,000
Contribution margin
1,540,000
Fixed expenses
1,100,000
Net operating income
$
440,000
Average operating assets
$
1,375,000
At the beginning of this year, the company has a $275,000
investment opportunity with the following cost and revenue
characteristics:
Sales
$
440,000
Contribution margin ratio
60
% of sales
Fixed expenses
$
220,000
The company’s minimum required rate...

The Scarf division of Wintertime Inc. reported the following
results from last year’s operations:
Sales
$1,000,000
Variable expenses
700,000
Contribution margin
300,000
Fixed
expenses
200,000
Net operating income
$100,000
Average operating assets
$1,000,000
At the beginning of the year the Scarf division had a $200,000
investment opportunity with the following characteristics:
Sales
$300,000
Contribution margin ratio
40%
of sales
Fixed expenses
$60,000
If the division pursues the investment opportunity and otherwise
performs the same as last year, the combined (new)...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 2 minutes ago

asked 3 minutes ago

asked 3 minutes ago

asked 4 minutes ago

asked 6 minutes ago

asked 11 minutes ago

asked 14 minutes ago

asked 24 minutes ago

asked 26 minutes ago

asked 26 minutes ago

asked 26 minutes ago