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 not attempted % Turnover not attempted ROI not attempted % Required 2: Using Lean Production, the company is able to reduce the average level of inventory by $96,000. (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 $124,000. Interest on the bonds is $15,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 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 $19,000 is scrapped and written off as a loss. (Round your intermediate calculations and final answers to 2 decimal places.) Effect Margin % Turnover ROI % Required 7: At the beginning of the year, the company uses $176,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock. (Round your intermediate calculations and final answers to 2 decimal places.) Effect Margin % Turnover ROI %
CH11_HW_QA3_PIR
Required 1:
Compute the company’s
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Required 2:
Using Lean Production, the company is able to reduce the average level of inventory by $96,000. (The released funds are used to pay off short-term creditors.) (Round your intermediate calculations and final answers to 2 decimal places.)
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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.)
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Required 4:
The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $124,000. Interest on the bonds is $15,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 per year. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
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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.)
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Required 6:
At the beginning of the year, obsolete inventory carried on the books at a cost of $19,000 is scrapped and written off as a loss. (Round your intermediate calculations and final answers to 2 decimal places.)
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Required 7:
At the beginning of the year, the company uses $176,000 of cash (received on
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1) Margin = Net operating income / sales
= $80000/$1000000 x 100
= 8%
Turnover = Sales / Average operating assets
= $ 1000000 /$498000
= 2.00times
ROI = Margin x turnover
= 8% x 2 = 16%
2). If company reduces the average level of inventory by $96000 , average operating assets of the company will also reduced by $96000 so the new average operating assets
=$498000- $96000
=$402000
Margin = Net operating income / sales
= $80000/$1000000 x 100
= 8%
Turnover = Sales / Average operating assets
= $1000000 / $402000
=2.48 times
ROI = Margin x turnover
= 8% x 2.48 = 19.84 %
| Margin | 8% | % | Unchanged |
| Turnover | 2.48 | Increase | |
| ROI | 19.84 | % | Increase |
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