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

Total Unit

Sales $ $1,004,000$ $ $50\mathrm{.}20$

Variable expenses $602,40030\mathrm{.}12$

Contribution margin $401,60020\mathrm{.}08$

Fixed expenses $319,60015\mathrm{.}98$

Net operating income $82,0004\mathrm{.}10$

Income taxes @ $40\%32,8001\mathrm{.}64$

Net income $ $49,200$ $ $2\mathrm{.}46$

The company had average operating assets of $$501,000$ 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.

Using Lean Production, the company is able to reduce the average level of inventory by $$110,000.$

The company achieves a cost savings of $$10,000$ per year by using less costly materials.

The company purchases machinery and equipment that increases average operating assets by $$125,000.$ Sales remain unchanged. The new, more efficient equipment reduces production costs by $$7,000$ per year.

As a result of a more intense effort by sales people, sales are increased by $10\%$; operating assets remain unchanged.

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.

At the beginning of the year, the company uses $$183,000$ of cash $($received on accounts receivable$)$ to repurchase some of its common stock.