The contribution format income statement for Huerra Company for last year is given below:     Total Unit Sales $ 4,000,000 $ 80.00 Variable expenses   2,800,000   56.00 Contribution margin   1,200,000   24.00 Fixed expenses   840,000   16.80 Net operating income   360,000   7.20 Income taxes @ 30%   108,000   2.16 Net income $ 252,000 $ 5.04     The company had average operating assets of $2,000,000 during the year. 4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $500,000. Interest on the bonds is $60,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $20,000 per year. 5. As a result of a more intense effort by salespeople, 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 $40,000 is scrapped and written off as a loss. 7. At the beginning of the year, the company uses $200,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock. REQUIED 4 The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $500,000. Interest on the bonds is $60,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $20,000 per year. (Round your intermediate calculations and final answers to 2 decimal places.)               Effect Margin   %   Turnover       ROI   % REQUIRED 5 As a result of a more intense effort by salespeople, sales are increased by 20%; 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 $40,000 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 $200,000 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   %

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The contribution format income statement for Huerra Company for last year is given below:

 

  Total Unit
Sales $ 4,000,000 $ 80.00
Variable expenses   2,800,000   56.00
Contribution margin   1,200,000   24.00
Fixed expenses   840,000   16.80
Net operating income   360,000   7.20
Income taxes @ 30%   108,000   2.16
Net income $ 252,000 $ 5.04
 

 

The company had average operating assets of $2,000,000 during the year.

4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $500,000. Interest on the bonds is $60,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $20,000 per year.

5. As a result of a more intense effort by salespeople, 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 $40,000 is scrapped and written off as a loss.

7. At the beginning of the year, the company uses $200,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock.

REQUIED 4

The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $500,000. Interest on the bonds is $60,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $20,000 per year. (Round your intermediate calculations and final answers to 2 decimal places.)

 
 
 
 
      Effect
Margin   %  
Turnover      
ROI  

%

REQUIRED 5

As a result of a more intense effort by salespeople, sales are increased by 20%; 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 $40,000 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 $200,000 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   %
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