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

Question

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

Explanation / Answer

Net operating income of investment opportunity = (580000*70%)-319000= 87000 7 Margin =Net operating income/Sales =(300000+87000)/(1500000+580000)= 18.6%

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