managerial accounting questions homework help

Westerville Company reported the following results from last yearâ€s operations:

 Sales

$

2,000,000 

 Variable expenses

640,000  

 Contribution margin

1,360,000  

 Fixed expenses

860,000 

 Net operating income

$

 500,000  

 Average operating assets

$

1,250,000  

This year, the company has a $250,000 investment opportunity with the following cost and revenue characteristics:

 Sales

$

400,000

 Contribution margin ratio

70

 % of sales

 Fixed expenses

$

220,000

The companyâ€s minimum required rate of return is 10%.
 

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 (i.e .1234 should be entered as 12.3))

10-a.

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?

10-b.

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?

15-a.

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?

15-b.

Would the owners of the company want her to pursue the investment opportunity?