[The following information applies to the questions displayed below] Westerville Company reported th
[The following information applies to the questions displayed below]
Westerville Company reported the following results from last yearâ€™s operations: 
Sales 
$ 
1,500,000 
Variable expenses 
730,000 




Contribution margin 
770,000 

Fixed expenses 
470,000 




Net operating income 
$ 
300,000 



Average operating assets 
$ 
937,500 




This year, the company has a $362,500 investment opportunity with the following cost and revenue characteristics: 
Sales 
$ 
580,000 

Contribution margin ratio 
70 
% of sales 

Fixed expenses 
$ 
319,000 


The companyâ€™s minimum required rate of return is 10% 
Required: 
1 
What is last yearâ€™s margin? 
2 
What is last yearâ€™s turnover? (Round your answer to 1 decimal place) 
3 
What is last yearâ€™s return on investment (ROI)? 
4 
What is the margin related to this yearâ€™s investment opportunity? 
5 
What is the turnover related to this yearâ€™s investment opportunity? (Round your answer to 1 decimal place) 
6 
What is the ROI related to this yearâ€™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? (Round your percentage answer to 1 decimal place (ie 1234 should be entered as 123)) 
8 
If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? (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? (Round your percentage answer to 1 decimal place (ie 1234 should be entered as 123)) 
10a 
If Westervilleâ€™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? 
10b 
Would the owners of the company want her to pursue the investment opportunity? 
11 
What is last yearâ€™s residual income? 
12 
What is the residual income of this yearâ€™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 Westervilleâ€™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? 
15a 
Assume that the contribution margin ratio of the investment opportunity was 60% instead of 70% If Westervilleâ€™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? 
15b 
Would the owners of the company want her to pursue the investment opportunity? 