The contribution format income statement for Huerra Company for last year is given below: Sales Variable...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/665327e5b425b_733665327e5ae738.jpg)
Transcribed Image Text:
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 @ 40% Net income Total $ 994,000 Unit $ 49.70 596,400 29.82 397,600 19.88 319,600 15.98 78,000 3.90 31,200 1.56 $ 46,800 $ 2.34 The company had average operating assets of $496,000 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 $103,000. 3. The company achieves a cost savings of $7,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $127,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 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 $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 $180,000 of cash (received on accounts receivable) to repurchase some of its common stock. 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 @ 40% Net income Total $ 994,000 Unit $ 49.70 596,400 29.82 397,600 19.88 319,600 15.98 78,000 3.90 31,200 1.56 $ 46,800 $ 2.34 The company had average operating assets of $496,000 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 $103,000. 3. The company achieves a cost savings of $7,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $127,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 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 $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 $180,000 of cash (received on accounts receivable) to repurchase some of its common stock.
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Suppose we roll a fair die two times. a. How many different samples are there? b. List each of the possible samples and compute the mean. c. On a chart similar to Chart 82, compare the distribution...
-
Dun Horse and Associates, a firm of real estate agents, had the following transactions represented during September: 1 Arranged a sale of an apartment building owned by a client. The commission for...
-
Explain the role of a marketing information system and a marketing decision support system in marketing decision making.
-
Edward Nabors owns Enclose, which designs and manufactures perimeter fencing for large retail and commercial buildings. Each job goes through three stages: design, production, and installation. Three...
-
14. The following lists the background factors behind the introduction of the Government Project Preliminary Feasibility Study (PFS) in South Korea. Which is NOT INCORRECT? (a) The growing importance...
-
Let y = f(x) be a function that is differentiable at all real numbers. Suppose f has the form f(x) = {; [cx +6 4+2c for x 1 for x > 1. where b and c are some constants. What is the value of the...
-
Consider the sequence (n) defined by xn = (a) Show that 0In - n! nn (b) Use the result of part (a) and the Squeeze theorem to show that In 0 and n o.
-
Officials of Gwinnett County, one of the fastest growing counties in the country, are looking for ways to expand their sewer system. They are considering two alternative sewer designs. All annual...
-
On August 1, 20Y7, Rafael Masey established Planet Realty, which completed the following transactions during the month: Rafael Masey transferred cash from a personal bank account to an account to be...
-
The following information summarizes the activities in the Mixing Department for the month of March. Beginning inventory 1 , 0 0 0 units, 8 0 % complete Started and completed 2 4 , 5 0 0 units Ending...
-
3) The type of evaluation carried out by the individual social worker to determine the degree of progress toward identified problems, and achievement of agreed-upon goals is: a) Needs Assessment b)...
-
In 2008, Mufosta Inc. issued 1,000 shares of $10 par value common stock for land worth $50,000. (a) Prepare Mufostas journal entry to record the transaction. (b) Indicate the effect the transaction...
-
(Statement Presentation of TransactionsIndirect Method) Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year...
-
(Classification of Transactions) Red Hot Chili Peppers Co. had the following activity in its most recent year of operations. Instructions Classify the items as (1) operatingadd to net income; (2)...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App