The Foundational $15($Algo$)[$LO$11-1,$ LO$11-2]$

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

Sales $ $1,500,000$

Variable expenses $650,000$

Contribution margin $850,000$

Fixed expenses $580,000$

Net operating income $ $270,000$

Average operating assets $ $1,000,000$

At the beginning of this year, the company has a $$160,000$ investment opportunity with the following cost and revenue characteristics:

Sales $ $240,000$

Contribution margin ratio $70\%$ of sales

Fixed expenses $ $144,000$

The company$$s minimum required rate of return is $10\%.1.$ What is last year$$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?

Note: Round your answer to $1$ decimal place. $6.$ 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?

Note: Round your percentage answer to $1$ decimal place. $8.$ If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?

Note: Round your answer to $2$ decimal places. $9.$ If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?

Note: Round your percentage answer to $1$ decimal place $($i$.$e$.,0\mathrm{.}1234$ should be considered as $12\mathrm{.}3\%.)10-$a$.$ 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 pursue the investment opportunity?

multiple choice $1$

Yes

No

$10-$b$.$ Would the owners of the company want her to pursue the investment opportunity?

multiple choice $2$

Yes

No $11.$ 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 bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?

multiple choice

Yes

No $15-$a$.$ Assume the contribution margin ratio of the investment opportunity was $65\%$ 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?

multiple choice $1$

Yes

No

$15-$b$.$ Would the owners of the company want her to pursue the investment opportunity?

multiple choice $2$

Yes

No