The contribution format income statement for Westex, Inc fo the most recent period is given below

		total	unit
sales		1,000,000	50.00
variable expenses		600,000	30.00
contribution margin		400,000	20.00
fixed expenses		320,000	16.00
net operating income		80,000	4.00
income taxes @	40%	32,000	1.60
net income		48,000	2.40

The company had average operating assets of $500,000 during the period

Solve:

1. Compute the company's ROI for the period using the ROI formula in the terms of margin and turnover

( for each of the followin questions indicate whether the margin and turnover will increase, decrease or remain unchaged as a resulf to the events described , and then compute the new ROI figure. Consider each question separately, starting in each case from the orginal ROI computed in (1) above.

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

3 Using Lean production the company is able to reduce the average level of inventory by $100,000. ( the released funds are used to pay off bank loans)

4. Sales are increased by $100,000 operating assets remain unchanged

5 the comapny issues bonds and usses the proceeds to purchase 125,000 in machinery and equipment at the beginning of the period. Interest on the bonds is $15,000 per period. Sales remain unchanged. The new more efficient equipment reduces production cost by $5,000 per period

6 the company invest 180,000 of cash (received on accounts receivable ) in a plot of land that is to be held for possible future use as a plant site

7 Obsolete inventory carried on the books at a cost of $20,00 is scrapped and written off as a lose