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! Required information [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 Average operating assets $ 2,000,000 640,000 1,360,000 860,000 $ 500,000 $ 1,250,000 At the beginning of this year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $ 400,000 70% of sales $ 220,000 The company's minimum required rate of return is 10% 13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? Residual income Required information [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 Average operating assets $ 2,000,000 640,000 1,360,000 860,000 $ 500,000 $1,250,000 At the beginning of this year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics Sales Contribution margin ratio Fixed expenses $ 400,000 70% of sales $ 220,000 The company's minimum required rate of return is 10% 14. If Westerville's 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? Yes O No Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $ 2,000,000 640,000 1,360,000 860,000 $ 500,000 $ 1,250,000 At the beginning of this year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $ 400,000 70% of sales $ 220,000 The company's minimum required rate of return is 10% 15-a. Assume that the contribution margin ratio of the investment opportunity was 60% instead of 70%. If Westerville's 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? O Yes ONo 15-b. Would the owners of the company want her to pursue the investment opportunity? O Yes Cane Company manufactures two products called Alpha and Beta that sell for $185 and $150, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 119,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 40 33 20 28 25 28 $174 Beta $ 24 28 18 31 21 23 $145 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 5. Assume that Cane expects to produce and sell 108,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 23,000 additional Alphas for a price of $132 per unit, however pursuing this opportunity will decrease Alpha sales to regular customers by 12,000 units. a. What is the financial advantage (disadvantage) of accepting the new customer's order? b. Based on your calculations above should the special order be accepted? Complete this question by entering your answers in the tabs below. Req 5A Reg 58 What is the financial advantage (disadvantage) of accepting the new customer's order? ***************************** Req 5B > Cane Company manufactures two products called Alpha and Beta that sell for $185 and $150, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 119,000 units of each product. Its average cost per unit for each product at this level of activity are given below Beta $ 24 28 18 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 40 33 20 28 25 28 $174 31 21 23 $145 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 5. Assume that Cane expects to produce and sell 108,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 23,000 additional Alphas for a price of $132 per unit, however pursuing this opportunity will decrease Alpha sales to regular customers by 12,000 units. a What is the financial advantage (disadvantage) of accepting the new customer's order? b. Based on your calculations above should the special order be accepted? Complete this question by entering your answers in the tabs below. Req 5A Reg 5B 7 Based on your calculations in req. Sa should the special order be accepted? OYes No