Reference no: EM132719980

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

sales ............. 1,000,000.00

Variable expense ...................300,000.00

contribution Margin ...............700,000.00

Fixed expenses..........................500,000.00

Net Operating income ............200,000.00

Average operating asset......... 625,000.00

This year the company has s $120,000 investment opportunity with the following cost and revenue characteristic

sales ............... 200,000.00

Contribution Margin ratio 60% of sales

Fixed expenses ................. 90,000.00

sales ................................... 7,500,000.00

The company's minimum required rate of return is 15%

Compute for:

Problem 1: What is the margin related to this year's investment opportunity? The margin for this year's investment opportunity is:

Problem 2: What is the turn over related to this year's investment opportunity?

Problem 3: What is the ROI related to this year's investment opportunity is?

Problem 4: If the company pursues the investment opportunity and otherwise performs the same as last year . What margin will earn this year.

Problem 5: If the company pursues the investment opportunity and otherwise performs the same as last year . What turn over will it earn this year?

Problem 6: If the company pursues the investment opportunity and otherwise performs the same as last year . What ROI will it earn this year?

Problem 7: If westerville chief executive officer will earn a bonus only if her ROI fom this year exceeds her ROI from from last year would she pursue the investment opportunit? Would the owners of the company want want her to pursue the investment opportunity?