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The contribution format income statement for Huerra Company for last year is given below. Sales Vitable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 408 Het income Total Tai $1,000,000 50.20 602,400 30.12 101,600 20.03 321.600 80,000 1.00 32,000 1.60 45.000 $2.40 The company had average operating assets of $490,000 during the year Required: 1. Compute the company's return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover. 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 $104,000. (The released funds are used to pay off short-term creditors.) 3. The company achieves a cost savings of $13,000 per year by using less costly materials 4. The compary issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $124.000. Interest on the bonds is $16,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7000 per year 5. As a result of a more intense effort by salespeople, sales are increased by 25% operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $16,000 is scrapped and written off as a loss 7. At the beginning of the year, the company uses $175.000 of cash (received on accounts receivable) to repurchase and retire some of its common stock 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 $16,000 per year. 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 salespeople, sales are increased by 25%, operating assets remain unchanged 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $16.000 is scrapped and written off as a loss. 7. At the beginning of the year, the company uses $175,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 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 answers to 2 decimal places.) Margin Tumover RO 7.57% 1.90 14.96 Required 2 > 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 $16,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7000 per year. 5. As a result of a more intense effort by salespeople, sales are increased by 25%, operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $16.000 is scrapped and written off as a loss 7 At the beginning of the year, the company uses $175,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required Required 6 Required Using Lean Production, the company is able to reduce the average level of inventory by $104,000. (The released funds are used to pay off short-term creditors.) (Round your intermediate calculations and final answers to 2 decimal places.) Margin Turnover ROI Elect 757 Unchanged 2.49 Increase 18 81% increase 4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating asse by $124,000. Interest on the bonds is $16,000 per year. 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 salespeople, sales are increased by 25%, operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $16,000 is scrapped and written off as a loss. 7. At the beginning of the year, the company uses $175,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required The company achieves a cost savings of $13,000 per year by using less costly materials. (Round your intermediate calculations and final answers to 2 decimal places.) Margin Turnover ROI Effect 8.67% Increase 1.98 Unchanged 17.13% increase 4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating a by $124.000. Interest on the bonds is $16,000 per year. 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 salespeople, sales are increased by 25%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $16,000 is scrapped and written off as a loss. 7. At the beginning of the year, the company uses $175,000 of cash (received on accounts receivable) to repurchase and retire sor of its common stock Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Requirear Required Required 6 Required 7 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 $16,000 per year. Sales remain unchanged. The new, more efficient equipment roduces production costs by $7,000 per year. (Do not round intermediate calculations and round your firal answers to 2 decimal places.) Show less Margin Tumover ROI Effect 7.97 increase 1.60 Decrease 1272 Decrease 4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating asse by $124.000. Interest on the bonds is $16,000 per year. 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 salespeople, sales are increased by 25%, operating assets remain unchanged 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $16,000 is scrapped and written off as a loss 7. At the beginning of the year, the company uses $175,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Regulads Required Required As a result of a more intente effort by salespeople, sales are increased by 25% operating assets remain unchanged. (Round your intermediate calculations and final answers to 2 decimal places.) Margin Turnover ROL Effect 7.70 Increase 2:37 increase 18.461 increase The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operat y $124.000. Interest on the bonds is $16,000 per year. Sales remain unchanged. The new, more efficient equipment reduce roduction costs by $7,000 per year. As a result of a more intense effort by salespeople, sales are increased by 25%; operating assets remain unchanged. At the beginning of the year, obsolete inventory carried on the books at a cost of $16,000 is scrapped and written off as a At the beginning of the year, the company uses $175,000 of cash (received on accounts receivable) to repurchase and retir of its common stock Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Require/6 Required 7 At the beginning of the year, obsolete inventory carried on the books at a cost of $16,000 is scrapped and written off as a loss. (Round your intermediate calculations and final answers to 2 decimal places.) Margin Turnover ROI Effect 3.47% Decrease 205 Increase 7.10.Decrease 4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating as by $124,000. Interest on the bonds is $16,000 per year. 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 salespeople, sales are increased by 25%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $16,000 is scrapped and written off as a loss 7. At the beginning of the year, the company uses $175,000 of cash (received on accounts receivable) to repurchase and retire som of its common stock Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 At the beginning of the year, the company uses $175,000 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.) Margin Turnover ROI Effect 4.54 unchanged 3.02 Increase 13.73 increase

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