Homework Help is Here – Start Your Trial Now!
Business
Accounting
The contribution format income statement for Huerra Company for last year is given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 40% Net income Total $ 998,000 598,800 399,200 315, 200 84,000 4.20 33,600 1.68 $ 50,400 $ 2.52 Unit $ 49.90 29.94 19.96 15.76 The company had average operating assets of $510,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for the period. For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a resul 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 $93,000. 3. The company achieves a cost savings of $11,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $129,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per year. 5. As a result of a more intense effort by sales people, sales are increased by 20%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $20,000 is scrapped and written off as a loss, thereby lowering net operating income. 7. At the beginning of the year, the company uses $180,000 of cash (received on accounts receivable) to repurchase some of its common stock.

The contribution format income statement for Huerra Company for last year is given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 40% Net income Total $ 998,000 598,800 399,200 315, 200 84,000 4.20 33,600 1.68 $ 50,400 $ 2.52 Unit $ 49.90 29.94 19.96 15.76 The company had average operating assets of $510,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for the period. For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a resul 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 $93,000. 3. The company achieves a cost savings of $11,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $129,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per year. 5. As a result of a more intense effort by sales people, sales are increased by 20%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $20,000 is scrapped and written off as a loss, thereby lowering net operating income. 7. At the beginning of the year, the company uses $180,000 of cash (received on accounts receivable) to repurchase some of its common stock.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

5

The contribution format income statement for Huerra Company for last year is given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 40% Net income Total $ 998,000 598,800 399,200 315, 200 84,000 33,600 $ 50,400 Unit $ 49.90 29.94 19.96 15.76 4.20 1.68 $ 2.52 The company had average operating assets of $510,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for the period. 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 $93,000. 3. The company achieves a cost savings of $11,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $129,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per year. 5. As a result of a more intense effort by sales people, sales are increased by 20%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $20,000 is scrapped and written off as a loss, thereby lowering net operating income. 7. At the beginning of the year, the company uses $180,000 of cash (received on accounts receivable) to repurchase some of its common stock.
Transcribed Image Text:The contribution format income statement for Huerra Company for last year is given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 40% Net income Total $ 998,000 598,800 399,200 315, 200 84,000 33,600 $ 50,400 Unit $ 49.90 29.94 19.96 15.76 4.20 1.68 $ 2.52 The company had average operating assets of $510,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for the period. 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 $93,000. 3. The company achieves a cost savings of $11,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $129,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per year. 5. As a result of a more intense effort by sales people, sales are increased by 20%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $20,000 is scrapped and written off as a loss, thereby lowering net operating income. 7. At the beginning of the year, the company uses $180,000 of cash (received on accounts receivable) to repurchase some of its common stock.
Expert Solution
steps

Step by step

Solved in 6 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Income Statement Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS