Question
The contribution format income statement for Westex, Inc., for its most recent period is given below: Total Unit Sales $ 996,000 $ 49.80 Variable expenses
The contribution format income statement for Westex, Inc., for its most recent period is given below: |
Total | Unit | ||||
Sales | $ | 996,000 | $ | 49.80 | |
Variable expenses | 597,600 | 29.88 | |||
Contribution margin | 398,400 | 19.92 | |||
Fixed expenses | 316,400 | 15.82 | |||
Net operating income | 82,000 | 4.10 | |||
Income taxes @ 40% | 32,800 | 1.64 | |||
Net income | $ | 49,200 | $ | 2.46 | |
The company had average operating assets of $503,000 during the period. |
Required: | |
1. | Compute the companys return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover. (Round your answer to 2 decimal places.) |
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 (1) above. |
2. | The company achieves a cost savings of $11,000 per period by using less costly materials. (Round your answers to 2 decimal places.) |
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