11. What is last year’s residual income? 12. What is the residual income of this

Question

11. What is last year’s residual income?

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

Required information The Foundational 15 [LO11-1, L011-2] 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 $ 1,750,000 520,000 1,230,000 880,000 350,000 Average operating assets875,000 At the beginning of this year, the company has a $200,000 investment opportunity with the following cost and revenue characteristics Sales Contribution margin ratio Pixed expenses $ 320,000 60% of sales $128,000 The company's minimum required rate of return is 20%.

Explanation / Answer

New Investment

Particulars Amt Net Income 350000 Less: Return on Assets
(875000 x 20%) 175000 Residual Income 175000

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.