Question
I am needing some help with this question, I have posted this twice before and each answer was all incorrect, not even a little bit
I am needing some help with this question, I have posted this twice before and each answer was all incorrect, not even a little bit close.
The contribution format income statement for Huerra Company for last year is given below:
Total | Unit | |||
Sales | $ | 4,000,000 | $ | 80.00 |
Variable expenses | 2,800,000 | 56.00 | ||
Contribution margin | 1,200,000 | 24.00 | ||
Fixed expenses | 840,000 | 16.80 | ||
Net operating income | 360,000 | 7.20 | ||
Income taxes @ 30% | 108,000 | 2.16 | ||
Net income | $ | 252,000 | $ | 5.04 |
The company had average operating assets of $2,000,000 during the year.
Required:
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.
1. As a result of a more intense effort by salespeople, sales are increased by 20%; operating assets remain unchanged. Margin%, Turnover amt $ and ROI ?
2. At the beginning of the year, obsolete inventory carried on the books at a cost of $40,000 is scrapped and written off as a loss. Margin%, Turnover amt $ and ROI ?
3. At the beginning of the year, the company uses $200,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock. Margin%, Turnover amt $ and ROI ?
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