Last year’s contribution format income statement for Huerra Company is given below: Total Unit Sales $ 1,002,000 $ 50.10 Variable expenses 601,200 30.06 Contribution margin 400,800 20.04 Fixed expenses 316,800 15.84 Net operating income 84,000 4.20 Income taxes @ 40% 33,600 1.68 Net income $ 50,400 $ 2.52 The company had average operating assets of $491,000 during the year. Required: Compute last year’s margin, turnover, and return on investment (ROI). For each of the following questions, indicate whether last year’s margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI. Consider each question separately. Using Lean Production, the company is able to reduce the average level of inventory by $100,000. The company achieves a cost savings of $10,000 per year by using less costly materials. The company purchases machinery and equipment that increase average operating assets by $125,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 per year. As a result of a more intense effort by sales people, sales are increased by 10%; operating assets remain unchanged. At the beginning of the year, obsolete inventory is scrapped, thereby lowering net operating income by $19,000. At the beginning of the year, the company uses $184,000 of cash (received on accounts receivable) to repurchase some of its common stock. please only answer this requirement 5 only As a result of a more intense effort by sales people, sales are increased by 10%; operating assets remain unchanged. Note: Round your intermediate calculations and final answer to 2 decimal places. Effect Margin ? % Increase Turnover ? Increase ROI 25.27 % Increase
Last year’s contribution format income statement for Huerra Company is given below: Total Unit Sales $ 1,002,000 $ 50.10 Variable expenses 601,200 30.06 Contribution margin 400,800 20.04 Fixed expenses 316,800 15.84 Net operating income 84,000 4.20 Income taxes @ 40% 33,600 1.68 Net income $ 50,400 $ 2.52 The company had average operating assets of $491,000 during the year. Required: Compute last year’s margin, turnover, and return on investment (ROI). For each of the following questions, indicate whether last year’s margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI. Consider each question separately. Using Lean Production, the company is able to reduce the average level of inventory by $100,000. The company achieves a cost savings of $10,000 per year by using less costly materials. The company purchases machinery and equipment that increase average operating assets by $125,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 per year. As a result of a more intense effort by sales people, sales are increased by 10%; operating assets remain unchanged. At the beginning of the year, obsolete inventory is scrapped, thereby lowering net operating income by $19,000. At the beginning of the year, the company uses $184,000 of cash (received on accounts receivable) to repurchase some of its common stock. please only answer this requirement 5 only As a result of a more intense effort by sales people, sales are increased by 10%; operating assets remain unchanged. Note: Round your intermediate calculations and final answer to 2 decimal places. Effect Margin ? % Increase Turnover ? Increase ROI 25.27 % Increase
Chapter22: S Corporations
Section: Chapter Questions
Problem 16CE
Related questions
Question
Last year’s contribution format income statement for Huerra Company is given below:
| Total | Unit | |
|---|---|---|
| Sales | $ 1,002,000 | $ 50.10 |
| Variable expenses | 601,200 | 30.06 |
| Contribution margin | 400,800 | 20.04 |
| Fixed expenses | 316,800 | 15.84 |
| Net operating income | 84,000 | 4.20 |
| Income taxes @ 40% | 33,600 | 1.68 |
| Net income | $ 50,400 | $ 2.52 |
The company had average operating assets of $491,000 during the year.
Required:
- Compute last year’s margin, turnover, and
return on investment (ROI).For each of the following questions, indicate whether last year’s margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI. Consider each question separately.
- Using Lean Production, the company is able to reduce the average level of inventory by $100,000.
- The company achieves a cost savings of $10,000 per year by using less costly materials.
- The company purchases machinery and equipment that increase average operating assets by $125,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 per year.
- As a result of a more intense effort by sales people, sales are increased by 10%; operating assets remain unchanged.
- At the beginning of the year, obsolete inventory is scrapped, thereby lowering net operating income by $19,000.
- At the beginning of the year, the company uses $184,000 of cash (received on
accounts receivable ) to repurchase some of its common stock.
please only answer this requirement 5 only
As a result of a more intense effort by sales people, sales are increased by 10%; operating assets remain unchanged.
Note: Round your intermediate calculations and final answer to 2 decimal places.
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