In Class Exercise Saved Help Problem 11-20 Return on Investment (ROI) Analysis [L011-1 The contribution format income statement for Huerra Company for last year is given below Sales Variable expenses Contribution marein Fixed expenses Net operating income Income taxes @ 38% Net income 4,000,000 88.00 56.00 24.00 16.80 7.20 2.16 $ 252,000 $ 5.04 2,800,000 1,280,000 840,000 360,080 108,000 The company had average operating assets of $2,000,000 during the year Required 1. Compute the company's return on investment (ROl) 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 ROl figure. Consider each question separately, starting in each case from the data used to compute the original ROl in (1) above. 2. Using Lean Production, the company is able to reduce the average level of inventory by $400,000 (The released funds are used to pay off short-term creditors) 3. The company achieves a cost savings of $32.000 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 $500,000, 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 5. As a result of a more intense effort by salespeople, sales are increased by 20%; operating assets remain unchanged 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $40,000 is scrapped and written off as a loss. 7. At the beginning of the year, the company uses $200,000 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 Help 11 In Class Exercise 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 ROl figure, Consider each question separately, starting in each case from the data used to compute the original ROl in (1) above. 2. Using Lean Production, the company is able to reduce the average level of inventory by $400.000. (The released funds are used to pay off short-term creditors) 3. The company achieves a cost savings of $32,000 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 $500,000. 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 5. As a result of a more intense effort by salespeople, sales are increased by 20%, operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost o 7. At the beginning of the year, the company uses $200000 of cash (received on accounts receivable) to repurchase and retire some $40.000 is scrapped and written off as a loss of its common stock Complete this question by entering your answers in the tabs below. | | | Required 2 || Required 3 | Required 4 1 Required 5 Required 6 Required 7 | Compute the company's return on investment (ROI) for the period using the ROt formula stated in terms of margin and turnover. (Round your answers to 2 decimal places.) Margin Turnover ROI Required2 > Complete this question by entering your answers in the tabs below Required 1Requi d 2Required 3 Required 4Required SRequired 6 Required 7 Using Lean Production, the company is able to reduce the average level of inventory by $400,000. (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 Required 3 Required 1 Complete this question by entering your answers in the tabs below. Required 1Required 2 Require3Required 4 Required 5 Required 6 Required 7 The company achieves a cost savings of $32,000 per year by using less costly materials. (Round your answers to 2 decimal places.) Effect Margin Turnover ROI Complete this question by entering your answers in the tabs below. d 3Requi Required 1Required 2Require ire Required 5Required 6Required 7 The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $500,000 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 intermediate calculations and final answers to 2 decimal places.) Margin Turnover ROI Complete this question by entering your answers in the tabs below. Required 7 Required Required 6 Required 1 Required 2 Required 3 Required 4 R As a result of a more intense effort by salespeople, sales areincreased by 20%; operating assets remain unchanged your intermediate calculations and final answers to 2 decimal places.) Round Margin Turnover ROI Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required s Regured 6 Required 7 At the beginning of the year, obsolete inventory carried on the books at a cost of $40,000 is scrapped and written off as a loss. (Round your intermediate calculations and final answers to 2 deimal places.) Margin Turnover ROI Complete this question by entering your answers in the tabs below Required. 1 Requireds l Required-1Required Required, Required3 equired! At the beginning of the year, the company uses $200,000 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