dit View History Bookmarks Window Help Chapter 11 Help Save&Exit Submit Check m 6 Problem 11-20 Return on Investment (ROI Analysis (LO11-1) The contribution format income statement for Huerra Company for last year is given below Contr ibution margin Fixed expenses 15.3 operat ing incm3 Income taxes 40 The company had average operating assets of $494,000 during the year t Compute the company's return on investment (RO) for the period using the ROI formula stated in terms of margin and 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 RO1n(? above. 2 Using Lean Production, the company is able to reduce the average level of inventory by $107000. (The released funds are used to pay off short-term creditiors) 3 The company achieves a cost savings of $14.000 per year by using less costly materials 4 The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $125,000 Interest on the bonds is $14,000 per year Sales remain unchanged. The new, more efficient equpment reduces production costs by $6.000 per year 5 As a result of a more intense effort by sales people, sales are increased by 10% operating assets remain unchanged 6 At the beoinning of the vear obsolete inventory camied on the books at a cost of $t8 000 is scraoced and written off as a C Prev 6o6 5 7 8