Wiswell Inc.reported the following results from last year's operations:
The average operating assets were $8,000,000.
At the beginning of this year,the company has a $900,000 investment opportunity that would involve sales of $2,070,000,a contribution margin ratio of 30% of sales,and fixed expenses of $538,200.The company's minimum required rate of return is 10%.If the company pursues the investment opportunity,this year's combined residual income for the entire company will be closest to:
A) $104,800
B) $925,600
C) ($19,800)
D) $994,800

Question

Wiswell Inc.reported the following results from last year's operations:
 The average operating assets were $8,000,000.
At the beginning of this year,the company has a $900,000 investment opportunity that would involve sales of $2,070,000,a contribution margin ratio of 30% of sales,and fixed expenses of $538,200.The company's minimum required rate of return is 10%.If the company pursues the investment opportunity,this year's combined residual income for the entire company will be closest to:
A) $104,800 
B) $925,600 
C) ($19,800) 
D) $994,800

Quizplus · Accepted Answer

11ea7761_1665_e14f_81a5_ab86320975da_TB2580_00 Net operating income = $912,000 + $82,800 = $994,800
Average operating assets = $8,000,000 + $900,000 = $8,900,000
 11ea7761_1666_0860_81a5_878b3fad11e4_TB2580_00