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4. The contribution format income statement for Huerta Company for last year is given below: Total Unit Bales $1, 006, 000 $50.30 Variable expenses 603,
4. The contribution format income statement for Huerta Company for last year is given below: Total Unit Bales $1, 006, 000 $50.30 Variable expenses 603, 600 30.18 Contribution margin 402, 400 20.12 Fixed expenses 218 , 400 15 .92 Net operating income 24,000 4.20 Income taxes @ 409 33, 600 1. 68 Net income $ 50, 400 $ 2.52 The company had average operating assets of $506,000 during the year. Required: A. Compute the company's margin, turnover, and return on investment (ROI) for the period. Margin Tumover RO For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI figure. Consider each question separately, starting in each case from the data used to compute the original ROI in (1) above. B. Using Lean Production, the company is able to reduce the average level of inventory by $100,000. Effect Margin Turnover ROI C. The company achieves a cost savings of $13,000 per year by using less costly materials. Effect Margin ROD. The company purchases machinery and equipment that increases average operating assets by $122,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per year. Effect Margin Turnover RO E. As a result of a more intense effort by sales people, sales are increased by 15%; operating assets remain unchanged. Effect Margin Turnover RO F. At the beginning of the year, obsolete inventory carried on the books at a cost of $18,000 is scrapped and written off as a loss, thereby lowering net operating income. Margin RO G. At the beginning of the year, the company uses $176,000 of cash (received on accounts receivable) to repurchase some of its common stock. Effect Margin TUMTOYET RO
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