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The contribution format income statement for Smith & Company for its most recent period is given below: Sales Less: variable expenses Contribution margin Total
The contribution format income statement for Smith & Company for its most recent period is given below: Sales Less: variable expenses Contribution margin Total $1,000,000 Unit $100.00 600,000 60.00 400,000 40.00 Less: fixed expenses 320,000 Operating income 80,000 Less: income taxes at 40% 32,000 Net income $ 48,000 The company had average operating assets of $500,000 during the period. Required: 1. Compute the company's ROI for the period using the ROI formula stated in terms of margin and turnover. ROI 16 % 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 original ROI computed in part (1) above. 2. The company achieves cost savings of $20,000 per period by using less costly materials. Margin Turnover ROL Effect % %
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