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The contribution format income statement for Huerra Company for last year is given below Total Unit Sales Variable expenses Contribution margin Fixed expenses Net operating
The contribution format income statement for Huerra Company for last year is given below Total Unit Sales Variable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 40% Net income S 1,006,000 603,600 402,400 320,400 82,000 32,800 S 49,200 S 50.30 30.18 20.12 4.10 1.64 S 2.46 The company had average operating assets of $500,000 during the year. 1. Compute the company's return on investment (ROI) for the period using the ROl formula stated in terms of margin and turnover Round your intermediate calculations and final answer to 2 decimal places.) Margin Turnover ROI 4.89 % 2.01 9.831 % 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 ROl figure. Consider each question separately, starting in each case from the data used to compute the original ROl in (1) above. 2. Using Lean Production, the company is able to reduce the average level of inventory by $95,000. (The released funds are used to pay off short-term creditors.) (Round your answers to 2 decimal places.) Effect Margin Turnover ROI 4.89|% 2.48 |Unchanged 12.13% increase 3. The company achieves a cost savings of $13,000 per year by using less costly materials. (Round your answers to 2 decimal places.) Effect Margin 5.67 % increase 2.01 11.40 % increase ROI
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