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

The company had average operating assets of $$2,000,000$ during the year.

Required:

$1)$ Compute the company's return on investment $($ROI$)$ for the period using the ROI formula stated in terms of margin and turnover. When computing ROI, use Income before taxes.

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. Consider each question separately $($independently$),$ 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 $$400,000.$ Sales and profits will remain the same. $($The released funds are used to pay off short$-$term creditors.$)$

$3)$ The company achieves a cost savings of $$32,000$ per year by using less costly materials $($no effect on inventory levels in $$ $).$

$4)$ The company reduces fixed expenses by $10\%$ by cutting advertising. This results in a $5\%$ reduction in sales volume. Assets remain unchanged.

$5)$ After spending $$60,000$ on training of salespeople, sales volume is expected to increase by $5\%$; operating assets remain unchanged.

$6)$ Obsolete inventory carried on the books at a cost of $$100,000$ is scrapped and written off as a loss.

$7)$ The company borrows $$200,000$ from the bank and invests in more efficient equipment; as a result, overall sales do not change, but variable expenses decrease by $5\%$ and fixed expenses increase by $$20,000.$

Hint:

$-$For $2$ through $7,$ just state if Margin will increase, decrease, or remain the same.

$-$Carry to the nearest $3$ decimals of a $\%$; may need to plug in numbers if both numerator and denominator move in the same direction $($i$.$e$.$ numerator or denominator both increase or both decrease$).$ If just the numerator or denominator change, while the other does not change, then you do not need to do the actual computation i$.$e$.$e if the numerator increases and the denominator stays the same, the ratio increases.