Please Answer All Questions

Problem 11-20 Return on Investment (ROI) Analysis [LO11-1] The contribution format Income statement for Huerra Company for last year is given below TotalUnit Sales Variable ontr margin Fixed expenses Net operating income Income taxes 409 Net incone $1,010,000 $50.50 606,000 30.30 404,000 20.20 324,000 16.20 80,000 4.00 32,000 1.60 $ 48,000 $ 2.40 The company had average operating assets of $510,000 during the year. Required: 1 Compute the company's return on investment (RO turnover. for the period using the ROl formula stated in terms of margin and 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 ROl in (1) above. 2. Using Lean Production, the company is able to reduce the average level of Inventory by $101,000. The released funds are used to pay off short-term c 3. The company achieves a cost savings of $11,000 per year by using less costy materlals. 4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $120,000. Interest on the bonds is $13,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per year 5. As a result of a more intense effort by sales people, sales are increased by 25%; operating assets remain unchanged. 6. At the beginning of the year, obsolete Inventory carried on the books at a cost of $17,000 is scrapped and written oft as a loss 7. At the beginning of the year, the company uses $177,000 of cash (recelved on accounts recelvable) to repurchase and retre some of its common stock