Tillamoke Company produces gourmet cheeses.Selected results from the most current year were as follows:
Sales revenue $3,500,000
Operating income 560,000
Average total assets 5,000,000
Production manager Melinda Penland is investing the purchase of a new fermenting station that will increase the plant's production capacity.Based on her research,Melinda thinks the station would cost $140,000 and would increase sales revenue by $200,000 and operating profit by $32,000.
Required
a.Calculate Tillamoke's current margin,asset turnover,and return on investment.
b.Calculate Tillamoke's margin,asset turnover,and return on investment assuming the company purchases the new fermenting station.
c.Assume Melinda Penland's annual bonus is based on the company's return on investment.Will Melinda support the purchase of the new fermenting station? Why or why not?

Question

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The Answer of Tillamoke Company produces gourmet cheeses.Selected results from the most current year were as follows:
Sales revenue $3,500,000
Operating income 560,000
Average total assets 5,000,000
Production manager Melinda Penland is investing the purchase of a new fermenting station that will increase the plant's production capacity.Based on her research,Melinda thinks the station would cost $140,000 and would increase sales revenue by $200,000 and operating profit by $32,000.
Required
a.Calculate Tillamoke's current margin,asset turnover,and return on investment.
b.Calculate Tillamoke's margin,asset turnover,and return on investment assuming the company purchases the new fermenting station.
c.Assume Melinda Penland's annual bonus is based on the company's return on investment.Will Melinda support the purchase of the new fermenting station? Why or why not?

Tillamoke Company Produces Gourmet Cheeses