**The problem is complete, but I need help with the wrong answers in RED.*
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 $ 1,006,000 $ 50.30 30.18 20.12 16.02 4.10 1.64 $ 2.46 603,600 402,400 320,400 82,000 32,800 $49,200 The company had average operating assets of $500,000 during the year. Required 1. Compute the company's return on investment (ROl) 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.) Answer is complete and correct. Margin Turnover ROI 8.150% 2.01 16.38 > % 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.) Answer is complete but not entirely correct. Effect Margin Turnover ROI 8.15 2.01 Unchanged Increase |Increase 16.400% 3. The company achieves a cost savings of $13,000 per year by using less costly materials. (Round your answers to 2 decimal places.) Answer is complete and correct. Effect Margin Turnover ROI 9.44 % |Increase 2.01 18.97 % Increase Unchanged 4. The company issues bonds and uses the proceeds to purchase $129,000 in machinery and equipment at the beginning of the period. Interest on the bonds is $13,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $3,000 per year. (Round your answers to 2 decimal places.) Answer is complete and correct. Effect Margin Turnover ROI 8.45 % Increase 1.60 Decrease 13.51 % |Decrease 5. Sales are increased by 10%; operating assets remain unchanged. (Round your answers to 2 decimal places.) Answer is complete and correct. Effect Margin Turnover ROI 11.050% 2.21 24.460% |Increase Increase |Increase 6. Obsolete inventory carried on the books at a cost of $17,000 is scrapped and written off as a loss. (Round your answers to 2 decimal places.) Answer is complete and correct. Effect Margin Turnover ROI 6.460% Decrease Increase 2.08 13.45 % Decrease 7. The company uses $179,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock. (Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Effect Margin Turnover ROI 8.150% Unchanged 2.08 Unchanged |Unchanged 13.450%
