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The Tracey Company had the following information for its most recent period: Total Unit % Sales $1,000,000 $50 100% Variable expenses 600,000 30 60% Contribution
The Tracey Company had the following information for its most recent period: | ||||||||
Total | Unit | % | ||||||
Sales | $1,000,000 | $50 | 100% | |||||
Variable expenses | 600,000 | 30 | 60% | |||||
Contribution margin | 400,000 | $20 | 40% | |||||
Fixed expenses | 320,000 | |||||||
Net operating income | $80,000 | |||||||
Average operating assets | $500,000 | |||||||
Compute the company's return on investment (ROI) for the period using the ROI | ||||||||
formula stated in terms of margin and turnover. | ||||||||
Net operating income | $80,000 | Correct! | ||||||
Sales | $1,000,000 | Correct! | ||||||
Average operating assets | $500,000 | Correct! | ||||||
Margin | 8.00% | Correct! | ||||||
Turnover | 2.0 | Correct! | ||||||
ROI | 16.00% | Correct! | ||||||
Required: | ||||||||
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. Each case is separate so you should return to the original | ||||||||
data for your computations. | ||||||||
Note: Formulas must be used for Margin, Turnover, and ROI. The other cells should be | ||||||||
formulas but I will allow typed in numbers. | ||||||||
(a) The company achieves a cost savings of $10,000 per period by using less costly materials. | ||||||||
Net operating income | $90,000 | Correct! | Type Increase, Decrease, or | |||||
Sales | $1,000,000 | Correct! | Unchanged in the space below | |||||
Average operating assets | $500,000 | Correct! | ||||||
Margin | 9.00% | Correct! | Increase | Correct! | ||||
Turnover | 2.0 | Correct! | Unchanged | Correct! | ||||
ROI | 18.00% | Correct! | Increase | Correct! | ||||
(b) 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.) | ||||||||
Net operating income | $80,000 | Correct! | Type Increase, Decrease, or | |||||
Sales | $1,000,000 | Correct! | Unchanged in the space below | |||||
Average operating assets | $400,000 | Correct! | ||||||
Margin | 8.00% | Correct! | Unchanged | Correct! | ||||
Turnover | 2.500 | Correct! | Increase | Correct! | ||||
ROI | 20.00% | Correct! | Increase | Correct! | ||||
(c) Sales are increased by $250,000; operating assets remained unchanged. (Remember, | ||||||||
if sales change, so will variable expenses.) | ||||||||
Sales | $1,250,000 | Correct! | ||||||
Variable expenses | 750,000 | Correct! | ||||||
Contribution margin | 500,000 | Correct! | ||||||
Fixed expenses | 320,000 | Correct! | ||||||
Net operating income | $180,000 | Correct! | ||||||
Net operating income | $180,000 | Correct! | Type Increase, Decrease, or | |||||
Sales | $1,250,000 | Correct! | Unchanged in the space below | |||||
Average operating assets | $500,000 | Correct! | ||||||
Margin | 14.40% | Correct! | Increase | Correct! | ||||
Turnover | 2.500 | Correct! | Increase | Correct! | ||||
ROI | 36.00% | Correct! | Increase | Correct! | ||||
(d) The company issues bonds and uses the proceeds to purchase $125,000 in machinery | ||||||||
and equipment at the beginning of the period. Sales remain unchanged. The new, more | ||||||||
efficient equipment reduces production costs by $5,000 per period. | ||||||||
Net operating income | $180,000 | Try Again! | Type Increase, Decrease, or | |||||
Sales | $1,200,000 | Try Again! | Unchanged in the space below | |||||
Average operating assets | $495,000 | Try Again! | ||||||
Margin | ? | Try Again! | Increase | Correct! | ||||
Turnover | ? | Try Again! | Decrease | Correct! | ||||
ROI | ? | Try Again! | Decrease | Correct! | ||||
(e) The company invests $180,000 of cash (received from accounts receivable) in a plot | ||||||||
of land that is to be held for possible future use as a plant site. | ||||||||
Net operating income | $0 | Try Again! | Type Increase, Decrease, or | |||||
Sales | Try Again! | Unchanged in the space below | ||||||
Average operating assets | Try Again! | |||||||
Margin | ? | Try Again! | unchanged | Correct! | ||||
Turnover | ? | Try Again! | Increase | Correct! | ||||
ROI | ? | Try Again! | increase | Correct! | ||||
(f) Obsolete inventory carried on the books at a cost of $20,000 is scrapped and written off | ||||||||
as a loss. | ||||||||
Net operating income | Try Again! | Type Increase, Decrease, or | ||||||
Sales | Try Again! | Unchanged in the space below | ||||||
Average operating assets | Try Again! | |||||||
Margin | ? | Try Again! | Decrease | Correct! | ||||
Turnover | ? | 2.083! | Increase | Correct! | ||||
ROI | ? | Try Again! | Decrease | Correct! |
| |||
I've answered some, I need help with the ones I was not able to answer (The ones that say "Try Again"). Please Show me the work don't just give me the answer |
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