Point Co. produces artificial stone materials used by landscapers. Investment in fixed assets totals \(\$ 1,400,000\). Sales and expense information is as follows:

Management at Point Co. believes variable costs could be reduced from \(60 \%\) of sales to \(53 \%\) of sales by using a product-oriented layout, rather than a process-oriented layout. To reconfigure the plant would require additional fixed costs of \(\$ 25,000\) annually, but total assets would remain constant. Assume the change also would help the company increase sales by \(6 \%\).

a. Calculate the company's return on assets (NI/Assets) prior to converting to the productoriented layout.

b. Calculate the company's return on assets (NI/Assets) after converting to the productoriented layout.

c. Give examples of the types of costs the company might save as a result of reconfiguring the plant.

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Sales Variable manufacturing and administrative costs Fixed manufacturing and administrative costs Operating income $1,000,000 600,000 300,000 $ 100,000