CH11_HW_QA3_LARequired 1: Compute the company’s return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover. (Round your intermediate calculations and final answer to 2 decimal places.) Margin %Turnover ROI % Required 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 intermediate calculations and final answers to 2 decimal places.) EffectMargin % Turnover ROI % Required 3: The company achieves a cost savings of $14,000 per year by using less costly materials. (Round your intermediate calculations and final answers to 2 decimal places.) EffectMargin % Turnover ROI % Required 4: The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $125,000. Interest on the bonds is $10,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $4,000 per year. (Do not round intermediate calculations and round your final answers to 2 decimal places.) EffectMargin % Turnover ROI % Required 5: As a result of a more intense effort by sales people, sales are increased by 15%; operating assets remain unchanged. (Round your intermediate calculations and final answers to 2 decimal places.) EffectMargin % Turnover ROI % Required 6: At the beginning of the year, obsolete inventory carried on the books at a cost of $18,000 is scrapped and written off as a loss. (Round your intermediate calculations and final answers to 2 decimal places.) EffectMargin % Turnover ROI % The contribution format income statement for Huerra Company for last year is given below:TotalUnit$ 49.60SalesVariable expensesContribution marginFixed expenses992,000595, 20029.76396,80019.84318,80078,00031,20015.94Net operating incomeIncome taxes @ 40%3.901.56Net income46,800$ 2.34The company had average operating assets of $506,000 during the year.Required:1. Compute the company's return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover.For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a resultof the events described, and then compute the new ROI figure. Consider each question separately, starting in each case from the dataused to compute the original ROI 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 topay off short-term creditors.)3. The company achieves a cost savings of $14,000 per year by using less costly materials.4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assetsby $125,000. Interest on the bonds is $10,000 per year. Sales remain unchanged. The new, more efficient equipment reducesproduction costs by $4,000 per year.5. As a result of a more intense effort by sales people, sales are increased by 15%; operating assets remain unchanged.6. At the beginning of the year, obsolete inventory carried on the books at a cost of $18,000 is scrapped and written off as a loss.7. At the beginning of the year, the company uses $181,000 of cash (received on accounts receivable) to repurchase and retire some ofits common stock,Complete this question by entering your answers in the tabs below.

The question pertains to calculation of ROI in terms of net margin and turnover. This method used…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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CH11_HW_QA3_LA

Required 1: Compute the company’s return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover. (Round your intermediate calculations and final answer to 2 decimal places.)


Margin		%
Turnover
ROI		%

Required 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 intermediate calculations and final answers to 2 decimal places.)

		Effect
Margin	%
Turnover
ROI	%

Required 3: The company achieves a cost savings of $14,000 per year by using less costly materials. (Round your intermediate calculations and final answers to 2 decimal places.)

		Effect
Margin	%
Turnover
ROI	%

Required 4: The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $125,000. Interest on the bonds is $10,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $4,000 per year. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

		Effect
Margin	%
Turnover
ROI	%

Required 5: As a result of a more intense effort by sales people, sales are increased by 15%; operating assets remain unchanged. (Round your intermediate calculations and final answers to 2 decimal places.)

		Effect
Margin	%
Turnover
ROI	%

Required 6: At the beginning of the year, obsolete inventory carried on the books at a cost of $18,000 is scrapped and written off as a loss. (Round your intermediate calculations and final answers to 2 decimal places.)

		Effect
Margin	%
Turnover
ROI	%

The contribution format income statement for Huerra Company for last year is given below:
Total
Unit
$ 49.60
Sales
Variable expenses
Contribution margin
Fixed expenses
992,000
595, 200
29.76
396,800
19.84
318,800
78,000
31,200
15.94
Net operating income
Income taxes @ 40%
3.90
1.56
Net income
46,800
$ 2.34
The company had average operating assets of $506,000 during the year.
Required:
1. Compute the company's return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover.
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 data
used to compute the original ROI 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.)
3. The company achieves a cost savings of $14,000 per year by using less costly materials.
4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets
by $125,000. Interest on the bonds is $10,000 per year. Sales remain unchanged. The new, more efficient equipment reduces
production costs by $4,000 per year.
5. As a result of a more intense effort by sales people, sales are increased by 15%; operating assets remain unchanged.
6. At the beginning of the year, obsolete inventory carried on the books at a cost of $18,000 is scrapped and written off as a loss.
7. At the beginning of the year, the company uses $181,000 of cash (received on accounts receivable) to repurchase and retire some of
its common stock,
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