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

Total Unit

Sales $ $994,000$ $ $49\mathrm{.}70$

Variable expenses $596,40029\mathrm{.}82$

Contribution margin $397,60019\mathrm{.}88$

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

Net operating income $78,0003\mathrm{.}90$

Income taxes @ $40\%31,2001\mathrm{.}56$

Net income $ $46,800$ $ $2\mathrm{.}34$

The company had average operating assets of $$509,000$ during the year.Required:

Compute the company's return on investment $($ROI$)$ for the period using the ROI formula stated in terms of margin and turnover.

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 $$99,000.($The released funds are used to

pay off short$-$term creditors.$)$

The company achieves a cost savings of $$6,000$ per year by using less costly materials.

The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets

by $$125,000.$ Interest on the bonds is $$16,000$ per year. Sales remain unchanged. The new, more efficient equipment reduces

production costs by $$6,000$ per year.

As a result of a more intense effort by salespeople, sales are increased by $20\%$; 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.

At the beginning of the year, the company uses $$178,000$ of cash $($received on accounts receivable$)$ to repurchase and retire some of

its common stock.

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.