Every dollar saved in purchasing is equivalent to a dollar of new income. Material cost-savings have a greater influence on the ROA than do sales increases, therefore it is easier for companies to generate cost-savings than to increase market share. To prove the aforementioned statements, use the given information of ABC Company to calculate your answers for the following questions. (Show your calculations) (20 points)

Sales $4,900,000 Labor Cost $600,000

Fixed Assets $3,000,000 Overhead Cost $900,000

Inventories $450,000 Materials Cost $2,400,000

Accounts Receivable $275,000 Other Costs $700,000

Cash $250,000

a. What is the current profit margin of the company? (3 points)

b. What is the current investment turnover of the company? (3 points)

c. What is the current ROA of the company? (3 point)

d. What will be the new profit margin if purchasing is able to reduce 5% of materials costs? (3 points)

e. What will be the new investment turnover if purchasing is able to reduce 5% of materials costs? (3 points)

f. What will be the new ROA if purchasing is able to reduce 5% of materials costs? (3 point)

g. What is your conclusion to this question? (2 point)