Required information The following information applies to th

Required information [The following information applies to the questions displayed below. Westerville Company reported the following results from last year\'s operations Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 1,900,000 550, 000 1,350,000 875,000 475,000 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 Contribution margin ratio Fixed expenses 380,000 50% of sales 133,000 The company\'s minimum required rate of return is 10%. 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 1234 should be entered as 12.3)) in

Solution

We are supposed to solve only 4 subparts when multiple posted

7)Margin= net income/sales
=(475000+(50%*380000)-133000)/(1900000+380000)
=23.33%

8)Turnover= sales/assets
=(1900000+380000)/(1187000+237500)
=1.6

9)ROI=Margin *turnover
=23.33%*1.6=37.33%

10)ROI last year= Net income/average assets
=475000/1187500=40%
This is higher than combined so he will not receive bonus