LaTreme Company has sales of \($1,210,000,\) cost of goods sold of \($735,000,\) other operating expenses of 148,000, average invested assets of \($5,335,000,\) and a hurdle rate of 13 percent.

Required:

1. Determine LaTreme’s return on investment (ROI), investment turnover, profit margin, and residual income.

2. Several possible changes that LaTreme could face in the upcoming year follow. Determine each scenario’s impact on LaTreme’s ROI and residual income. (Note: Treat each scenario independently.)

a. Company sales and cost of goods sold increase by 15 percent.

b. Operating expenses increase by \($73,000.\)

c. Operating expenses decrease by 10 percent.

d. Average invested assets decrease by \($285,000\)

e. LaTreme changes its hurdle rate to 9 percent.