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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
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 $ 1,000,000 600,000 400,000 322,000 78,000 31,200 $ 46,800 Unit $ 50.00 30.00 20.00 16.10 3.90 1.56 $ 2.34 The company had average operating assets of $500,000 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 $106,000. 3. The company achieves a cost savings of $13,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $128,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $6,000 per year. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Compute the company's margin, turnover, and return on investment (ROI) for the period. (Round your intermediate calculations and final answer to 2 decimal places.) Margin % Turnover ROI % Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Using Lean Production, the company is able to reduce the average level of inventory by $106,000. (Round your intermediate calculations and final answer to 2 decimal places.) Effect Margin %! Turnover ROI % Decrease 1 Required 3 > Increase Unchanged Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 The company achieves a cost savings of $13,000 per year by using less costly materials. (Round your intermediate calculations and final answer to 2 decimal places.) Effect Margin % Turnover ROI % Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 The company purchases machinery and equipment that increases average operating assets by $128,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $6,000 per year. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Effect % Margin Turnover ROI %
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