Return on Investment, Margin, Turnover Ready Electronics is facing stiff competition from imported goods. Its operating income margin has been declining steadily for the past several years. The company has been forced to lower prices so that it can maintain its market share. The operating results for the past 3 years are as follows: Year 1 Year 2 Year 3 Sales Operating income $10,000,000 $9,500,000 $9,000,000 1,200,000 1,045,000 945,000 15,000,000 15,000,000 15,000,000 Average assets For the coming year, Ready's president plans to install a IT purchasing and manufacturing system. She estimates that inventaries will be reduced by 70% during the first year of operations, producing a 20% reduction in the average operating assets of the company which would remain unchanged without the system. She also estimates that sales and operating income will be restored to Year Heves because of simultaneous reductions in operating expenses and selling prices. Lower selling prices will allow Ready to expand its market share. (Note: Round all numbers to two decimal places.) Required: 1. Compute the ROI, margin, and turnover for Years 1. 2 and 3 Year1 Year 2 Year 3 ROI Margir 12 s 10.5 Turnover 0.66 0.63 0.6 2. Conceptual Connection: Suppose that in Year 4 the sales and operating income were achieved as expected, but inventories remained at the same level as in Year) Compute the expected ROI, margin, and turnover ROI % Margin 12 Turnover 0.65 X Why did the ROI increase over the Year 3 level? The ROT increased because expenses decreased and assets turned over at a higher rate (sales increased) 3. Conceptual Connection: Suppose that the sales and net operating income for Year 4 remained the same as in Year 3 but inventory reductions were achieved as projected. Compute the ROI, margin, and turnover RO Margin 10.5% Turnover Why did the ROI exceed the Year 3 level? The ROI increased because assets decreased. 4. Conceptual Connection: Assume that all expectations for Year 4 were realized. Compute the expected ROI, margin, and turnover ROI X % Margin 12 Turnover Why did the ROI increase over the Year 3 level? The ROI increased because expenses decreased and assets turned over at a higher rate Zeige Company manufactures conserves for MP3 players in August of last year, Zen producing the seves During og beves that muced sleeves we really offer one years ago the month of August. 16.00 were produced, and 14,75 were M60 eachThe following costs were incurred Salesis August will be was a las que sure to complete below the income statement) Det materia 526380 Direct labor 6,720 da Porean August of the year and the edgher level of Metro Variable overhead 5920 The for Label and Amour Desertorenwording of them wis pour income Foed overhead 28160 sement A selling commission of 8% of sales price was paild Administrative per fed, amounted to 53710 Zelos Company Score: 733 Income Statement For August of This Year 1 S Required Calculate the cost and the cost of ending inventory under absorption costing Mound and cost to the nearest cant and coaf of ending inventory to the most dolor 2. Calculate the cost and the cost of ending invertory under variable costing Rund unt cost to the nearest cent and cost of ending inventory to the nearest dolar) 3. What is the contribution mari per unit? (Round to the recent) 4 CONCEPTUAL CONNECTION Ze believes that multicolored seves will really take of other one year of Management in this August we wice as high as sales August Prepare an income statement August of the rewing the assumed her level of sales which costing method should be used in costing or conting? 1 Less variables Variable cost of goods sold $12.500 Commi 5 Contribution margin Les fed experties Fredhead 576, 16000 Federative Operating income