If westervilles chief executive officer will earn a bonus

Assignment Help Accounting Basics

Reference no: EM13568481

Westerville Company Reported the following results from last years operations:

Sales.......$1,000,000.00

Variable Expenses........$300,000.00

Contribution Margin........$$700,000.00

Fixed Expenses.............$500,000.00

Net Operating Income......$200,000.00

Average Operating Assets........$625,000.00

This year the company has a $120,000.00 investment opportunity with the following cost revenue characteristics:

Sales.....$200,000.00

Contribution Margin Ratio........60% of sales.

Fixed Expenses.....$90,000.00

Questions:

1. What is last year's Margin?

2. What is last year's turnover?

3. What is last year's return on investment (ROI)?

4. What is the Margin related to this year's investment opportunity?

5. What is the turnover related to this year's investment opportunity?

6. What is the ROI related to this year's investment opportunity?

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

8. If the company pursues the investment opportnity and otherwise performs the same as last year, what turnover will it earn this year?

9. IF the compmany pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?

10. If Westerville's Chief Executive Officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pusue the investment opportunity? Would the owners of the company want her to puruse the investment opportunity?

11. What is last year's residual income?

12. What is the residual income of this year's investment opportunity?

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

14. If Westerville's Chief Executive Officer will earn a hourly bonus only if her residual income from las year exceeeds her residual income from last year. Would she pursue the investment opportunity?

15. Assume that the contribution margin ratio fo the investment opportunity was P instead of '. If Westerville's Cheif 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 oppportunity? Would the owners of the company want her to pursue the investment opportunity?

Reference no: EM13568481

Questions Cloud

What should be the current market value of the following : what should be the current market value of the following bond? hint use an appropriate financial calculation. coupon

O august 1 2013 hullie amp oates issued a 9-month note : prepare in journal entry form the adjusting journal entries for the following items. on june 1 2013 a 36-month

Go to httpwwwfbigovucrucrhtmcius again scroll down to the : go to httpwww.fbi.govucrucr.htmcius again. scroll down to the section entitled hate crime statistics and click on

Each year when crime in the united states is published : the uniform crime reports page on the fbi government web site provides links for their annual crime in the united

If westervilles chief executive officer will earn a bonus : westerville company reported the following results from last years operationssales.......1000000.00variable

Abc company aquired mineral rights for 9100000 the mineral : abc company aquired mineral rights for 9100000. the mineral deposit is estimated at 65000000 tons. during the current

What are the advantages and disadvantages of financial : what are the advantages and disadvantages of financial hedging of the firms operating exposure visagrave-vis

The uniform crime reports page on the fbi government web : part ithe uniform crime reports page on the fbi government web site provides links for their annual crime in the

Why might one expect that for a manager pursuing an active : why might one expect that for a manager pursuing an active management strategy that the backward-looking tracking error

User Account

All Pages