HOW TO SOLVE THIS QUESTION

The following information was provided by PEG Inc. for 2014. The company sells products to professional landscapers Total Per Unit Sales $ 200,000 $50 Variable Expenses 110,000 27.5 Contribution Margin 90,000 22.5 Fixed Expenses 50,000 Net Income before tax 40,000 PEG Inc. had average operating assets of $100,000 for the year 2014 Required: Consider each of the following unrelated assumptions a. Calculate the company's ROI for the year 2014. b. Using lean production the company was able to reduce the average level of inventory by $20,000. The funds will be used to pay off company's liabilities. What effect would this have on the company's ROI? c. $1000 worth of inventory carried on the books was scrapped and written off as a loss. What effect would this have on the company's ROI? d. What would be the company's residual income if minimum rate of return required is 15%