Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The contribution format income statement for Huerra Company for last year is given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income.

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

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 $ 1,002,000 Unit $ 50.10 601,200 30.06 400,800 20.04 322,800 16.14 78,000 3.90 31,200 1.56 $ 46,800 $ 2.34 The company had average operating assets of $495,000 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 $9,000 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 15% ; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $19,000 is scrapped and written off as a loss, thereby lowering net operating income. 7. At the beginning of the year, the company uses $184,000 of cash (received on accounts receivable) to repurchase some of its common stock.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Business Reporting For Decision Making

Authors: Jacqueline Birt, Keryn Chalmers, Albie Brooks, Suzanne Byrne, Judy Oliver

4th Edition

978-0730302414, 0730302415

More Books

Students also viewed these Accounting questions