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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
4. The company issues bonds and uses the proceeds to purchase $500,000 in machinery and equipment at the beginning of the period. 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 answers to 2 decimal places.) Effect Margin % Turnover times ROI % 5. Sales are increased by 20%; operating assets remain unchanged. (Round your answers to 2 decimal places.) Effect Margin % Turnover times ROI % 6. Obsolete inventory carried on the books at a cost of $40,000 is scrapped and written off as a loss. (Round your answers to 2 decimal places.) Effect Margin % Turnover times ROI % 7. The company uses $200,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock. (Round your answers to 2 decimal places.) Effect Margin % Turnover times ROI %

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