nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes that you increase inventories by 25 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Category Sales Cost of goods sold Variable expenses Fixed expenses Inventory Accounts receivable Current Values Proposed Impact of Inventory Increase 25% (improvement) $ 2,000,000 $ 1,500,000 08 $ 300,000 10% reduction $ 100,000 15% (increase) $ 300,000 25% + $ 100,000 0% Other current assets $ Fixed assets $ 500,000 400,000 0% 0% a. Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.) Category Current Values New Values Sales $ 2,000,000 $ 2,000,258 Cost of goods sold $ 1,500,000 Variable expenses $ 300,000 $ 299,892 Fixed expenses $ 100,000 $ 100,158 Inventory $ 300,000 $ 300,258 Accounts receivable $ 100,000 $ 100,008 Other current assets $ 500,000 Fixed assets $ 400,000 ROA % %

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes
that you increase inventories by 25 percent (a major investment to you). She has also given the information in the following table. Use
Figure 2.3.
Category
Sales
Cost of goods sold
Variable expenses
Fixed expenses
Inventory
Accounts receivable
Current Values
Proposed Impact of
Inventory Increase
25% (improvement)
$ 2,000,000
$ 1,500,000
08
$
300,000
10%
reduction
$
100,000
15%
(increase)
$ 300,000
25% +
$ 100,000
0%
Other current assets
$
Fixed assets
$
500,000
400,000
0%
0%
a. Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA"
to 2 decimal places.)
Category
Current Values
New Values
Sales
$
2,000,000
$ 2,000,258
Cost of goods sold
$
1,500,000
Variable expenses
$
300,000
$
299,892
Fixed expenses
$
100,000
$
100,158
Inventory
$
300,000
$
300,258
Accounts receivable
$
100,000
$
100,008
Other current assets
$
500,000
Fixed assets
$
400,000
ROA
%
%
Transcribed Image Text:nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes that you increase inventories by 25 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Category Sales Cost of goods sold Variable expenses Fixed expenses Inventory Accounts receivable Current Values Proposed Impact of Inventory Increase 25% (improvement) $ 2,000,000 $ 1,500,000 08 $ 300,000 10% reduction $ 100,000 15% (increase) $ 300,000 25% + $ 100,000 0% Other current assets $ Fixed assets $ 500,000 400,000 0% 0% a. Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.) Category Current Values New Values Sales $ 2,000,000 $ 2,000,258 Cost of goods sold $ 1,500,000 Variable expenses $ 300,000 $ 299,892 Fixed expenses $ 100,000 $ 100,158 Inventory $ 300,000 $ 300,258 Accounts receivable $ 100,000 $ 100,008 Other current assets $ 500,000 Fixed assets $ 400,000 ROA % %
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