For each of the scenarios below, indicate the effect (increase, decrease or no effect) it would have on ROI, RI, profit margin and asset turnover.
a. Equipment is sold for $40 000. It is currently valued in the books at $50 000 and was originally acquired for $100 000. Sales will not be affected.
b. The charge for capital is increased from 10 per cent to 12 per cent.
c. A piece of equipment is purchased that will replace some manual operations. Therefore, the labour required will be reduced and costs will be lowered. It is expected that operating costs will be reduced by 5 per cent overall.
d. Some obsolete inventory is written down.
e. The production manager produces 5000 more units of product than was planned. The increase in production does not increase sales.
f. An end of year marketing boost increases sales by 5 per cent. This increases profit?