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

	Total		Unit
Sales	$	996,000	$	49.80
Variable expenses		597,600		29.88
Contribution margin		398,400		19.92
Fixed expenses		322,400		16.12
Net operating income		76,000		3.80
Income taxes @ 40%		30,400		1.52
Net income	$	45,600	$	2.28

The company had average operating assets of $496,000 during the year

4. The company purchases machinery and equipment that increases average operating assets by $122,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $5,000 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 $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 $185,000 of cash (received on accounts receivable) to repurchase some of its common stock.

Effect 9 6 % Margin Turnover ROI % Effect 9 6 % Margin Turnover ROI % Effect 9 6 % Margin Turnover ROI % Effect 9 6 % Margin Turnover ROI %