The contribution format income statement for Huerra Company for last year is given below:

Total Unit

Sales $ $1,006,000$ $ $50\mathrm{.}30$

Variable expenses $603,60030\mathrm{.}18$

Contribution margin $402,40020\mathrm{.}12$

Fixed expenses $326,40016\mathrm{.}32$

Net operating income $76,0003\mathrm{.}80$

Income taxes @ $40\%30,4001\mathrm{.}52$

Net income $ $45,600$ $ $2\mathrm{.}28$

The company had average operating assets of $$492,000$ during the year.

Required:

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.

$1.$

$2.$ Using Lean Production, the company is able to reduce the average level of inventory by $$109,000.$

The company achieves a cost savings of $$8,000$ per year by using less costly materials.

The company purchases machinery and equipment that increases average operating assets by $$124,000.$ Sales remain unchanged. The new, more efficient equipment reduces production costs by $$7,000$ per year.

As a result of a more intense effort by sales people, sales are increased by $20\%$; operating assets remain unchanged.

At the beginning of the year, obsolete inventory carried on the books at a cost of $$15,000$ is scrapped and written off as a loss, thereby lowering net operating income.

At the beginning of the year, the company uses $$178,000$ of cash $($received on accounts receivable$)$ to repurchase some of its common stock.