Questions are listed below:
The contribution format income statement for Huerra Company for last year is given below: Total Unit Sales 5 992,388 $ 49. 50 Variable expenses 595,288 29.?6 Contribution margin 396,888 19.84 Fixed expenses 318,888 15.94- Net operating income 10,088 3.90 Income taxes @ 48% 31,288 1.56 Net income 4'5 45; 533 $ 2- 34 The company had average operating assets of $497,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment [ROI] for the period. 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. 2. Using Lean Production, the company is able to reduce the average level of inventory by $108,000. 3. The company achieves a cost savings of $9,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $128,000. Sales remain unchanged. The new, more efcient 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 20%; operating assets remain unchanged. 6. 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. 7. At the beginning of the year, the company uses $176,000 of cash {received on accounts receivable] to repurchase some of its common stock. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7' Compute the company's margin, tumover, and return on investment (ROI) for the period. (Round yol calculations and nal answer to 2 decimal places.) Tu mover Required 1 E Required 2 Required 3 Required 4 Required 5 Required 6 Required 7" Using Lean Production, the company is able to reduce the average level of inventory by $103,000. (R calculations and nal answer to 2 decimal places.) __ Turnover __ me "crease Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required Tr" The company achieves a cost savings of $9,000 per year by using less costly materials. (Round you and nal answer to 2 decimal places.) -_ ml_ Tumover ROI Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 3" The company purchases machinery and equipment that increases average operating assets by $128,( unchanged. The new, more efcient equipment reduces production costs by $1,000 per year. (Do not calculations and round your nal answers to 2 decimal places.) Turnover Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7" As a result of a more intense effort by sales people,r sales are increased by 20%: operating assets rt your intermediate calculations and nal answer to 2 decimal places.) _e_ __I_ Required 1 Required 2 Required 3 Required 4 Required 5 Required 7" At the beginning of the year, obsolete inventory carried on the books at a cost of $13,000 is scrappet loss,r thereby lowering net operating income. (Round your intermediate calculations and nal answer _I__ __I_ \"_I_ Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required Tn" At the beginning of the year,r the company uses $175,000 of cash (received on accounts receivable} common stock. (Round your intermediate calculations and nal answer to 2 decimal places.) Turnover
