My question is for #6 However you have to solve #1 to analyze #6

The obsolete inventory worth 40000 is scrapped, causing AOA to decrease and NOI to decrease. However sales is not effected, why is this?

#6 why is there no effect on sales?

Extra Info:

PROBLEM 10-20 Return on Investment (ROI) Analysis LO 10-1 The contribution format income statement for Huerra Company for last year is given below: Sales Variable expenses Contribution margin............... Fixed expenses. Net operating income .... .. Income taxes a 30%.......... Net income Total $4,000,000 2,800,000 1,200,000 840,000 360,000 108,000 $ 252,000 Unit $80.00 56.00 24.00 16.80 7.20 2.16 $ 5.04 The company had average operating assets of $2,000,000 during the year. Required: 1. Compute the company's return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover. 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 com figure. Consider each question separately, starting in each case from the data used to compute the original ROI in (1) above. Using Lean Production, the company is able to reduce the average level of inventory by $400,000 (The released funds are used to pay off short-term creditors.) TL ahlawan n asuinne af 20.000 mer year by using less costly materials. 6. 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. 7. 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. PROBLEM 10-21 Creating Balanced Scorecards that Support Different Strategies LO 10-4 The Midwest Consulting Group (MCG) helps companies build balanced Scorecards. As part of its marketing efforts, MCG conducts an annual balanced scorecard workshop for prospective clients. As MCG's newest employee, your boss has asked you to particinate in this vear's workshan huaynlain Ex 10-20 ROI = NOI - NOT & Saks AOA Sales AOA 3 60000 4,000000 4000 400 -3,092-.18 2000000 J. Ao A 40,000 J NOI. 140.000 ; ML , T^ 00 - 0 - 4000 -. 08 0.0A -.\0 : 16.3:/, 4 0 1,9