Westerville Company reported the following results from last years 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 companys minimum required rate of return is 20%.

References

Section BreakFoundational [LO11-1, LO11-2]

1.

value: 10.00 points

Required information

Foundational 11-1

Required:

1.	What is last years margin?

References

eBook & Resources

WorksheetFoundational 11-1

2.

value: 10.00 points

Required information

Foundational 11-2

2.	What is last years turnover? (Round your answer to 1 decimal place.)

References

eBook & Resources

WorksheetFoundational 11-2

3.

value: 10.00 points

Required information

Foundational 11-3

3.	What is last years return on investment (ROI)?

References

eBook & Resources

WorksheetFoundational 11-3

4.

value: 10.00 points

Required information

Foundational 11-4

4.	What is the margin related to this years investment opportunity?

References

eBook & Resources

WorksheetFoundational 11-4

5.

value: 10.00 points

Required information

Foundational 11-5

5.	What is the turnover related to this years investment opportunity? (Round your answer to 1 decimal place.)

References

eBook & Resources

WorksheetFoundational 11-5

6.

value: 10.00 points

Required information

Foundational 11-6

6.	What is the ROI related to this years investment opportunity?

References

eBook & Resources

WorksheetFoundational 11-6

7.

value: 10.00 points

Required information

Foundational 11-7

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))

References

eBook & Resources

WorksheetFoundational 11-7

8.

value: 10.00 points

Required information

Foundational 11-8

8.	If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? (Round your answer to 2 decimal places.)

References

eBook & Resources

WorksheetFoundational 11-8

9.

value: 10.00 points

Required information

Foundational 11-9

9.	If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%.))

Garrison 15e Recheck 2014-12-29

References

eBook & Resources

WorksheetFoundational 11-9

10.

value: 10.00 points

Required information

Foundational 11-10

10-a.	If Westervilles chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity?
	No Yes
10-b.	Would the owners of the company want her to pursue the investment opportunity?
	Yes No

References

eBook & Resources

WorksheetFoundational 11-10

11.

value: 10.00 points

Required information

Foundational 11-11

11.	What is last years residual income?

References

eBook & Resources

WorksheetFoundational 11-11

12.

value: 10.00 points

Required information

Foundational 11-12

12.	What is the residual income of this years investment opportunity?

References

eBook & Resources

WorksheetFoundational 11-12

13.

value: 10.00 points

Required information

Foundational 11-13

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

References

eBook & Resources

WorksheetFoundational 11-13

14.

value: 10.00 points

Required information

Foundational 11-14

14.	If Westervilles chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?
	No Yes

References

eBook & Resources

WorksheetFoundational 11-14

15.

value: 10.00 points

Required information

Foundational 11-15

15-a.	Assume that the contribution margin ratio of the investment opportunity was 50% instead of 60%. If Westervilles Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?
	No Yes

15-b.	Would the owners of the company want her to pursue the investment opportunity?
	No Yes

References

eBook & Resources