Westerville Company reported the following results from last year's operations:
This year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics:
Sales
$360,000
Contribution margin ratio
70% of sales
Fixed expenses
$216,000
The company's minimum required rate of return is 10%.
Q2 refer to Westerville above:
a. What is last year's margin
b. What is last year's turnover
c. What is last year's ROI
d. What is last year's RI
e. What is the ROI related to this year's investment opportunity
Cumberland County Senior Services is a non-profit organization devoted to providing essential services to seniors who live in their own homes within the Cumberland County area.Three services are provided for seniors-home nursing,Meals on
health and to perform tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow:
Home Nursing $301,600 142,400 159,200
Meals on Wheels $464,000 250,000 214,000
House- keeping $278,400 188,800 89,600
Total $1,044,000 581,200 462,800
Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators'salaries General administrative overhead' Total fixed expenses Operating income (loss)
74,080 47,920 125,400 208,800 456,200 $ 6,600
9,280 22,400 44,000 60,320 136.000 $23,200
42,400 8,600 40,400 92,800 184,200 $29,800
22,400 16,920 41,000 55,680 136,000 $ (46,400)
*Allocated on the basis of program revenues
The head administrator of Cumberland County Senior Services,Judith Ewa,is concerned about the organization's finances and considers the operating income of s6,60o last year to be razor-thin.(Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession.After seeing the above
The depreciation in the housekeeping category is for a small van that is used to carry the housekeepers and their eguipment
assume zero salvage value. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided.
Q4
a. Compute the change in net operating income for the company as a whole if housekeeping
program be discontinued
b. Should the housekeeping program be discontinued