Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
The income statement for Huerra Company for last year is provided below: Total Unit Sales $ 12,600,000 $ 252
| The income statement for Huerra Company for last year is provided below: |
| Total | Unit | |||||||
| Sales | $ | 12,600,000 | $ | 252.00 | ||||
| Less: Variable expenses | 10,080,000 | 201.60 | ||||||
| Contribution margin | 2,520,000 | 50.40 | ||||||
| Less: Fixed expense | 1,260,000 | 25.20 | ||||||
| Net operating income | 1,260,000 | 25.20 | ||||||
| Less: Income taxes @ 30% | 378,000 | 7.56 | ||||||
| Net income | $ | 882,000 | $ | 17.64 | ||||
| The company had average operating assets of $6,000,000 during the year. |
| Required: |
| 1. |
Compute the company’s ROI for the period using the ROI formula stated in terms of margin and turnover. (Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) |
| 2. |
Consider each of the following questions separately and then compute the new ROI figure. Indicate whether the ROI will increase, decrease, or remain unchanged as a result of the events described. |
| a. |
By using JIT, the company is able to reduce the average level of inventory by $300,000. (The released funds are used to pay off short-term creditors.) (Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) |
| b. |
The company achieves a savings of $13 per unit by using cheaper materials. (Round intermediate and final answer to 2 decimal places.) |
| c. |
The company issues bonds and uses the proceeds to purchase machinery and equipment, thus increasing the average assets by $600,000. Interest on the bonds is $60,000 per year. Sales remain unchanged. The new more efficient equipment reduces fixed production costs by $30,000 per year.(Round intermediate and final answer to 2 decimal places.) |
| d. |
As a result of a more intense effort by the sales staff, sales are increased by 20%; operating assets remain unchanged. (Round intermediate and final answer to 2 decimal places.) |
| e. |
Obsolete items of inventory carried on the records at a cost of $110,000 are scrapped and sold for 20% of the book value. (Use full amount of scrap while calculating average operating assets. Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) |
| f. |
The company uses $600,000 in cash (received on accounts receivable) to repurchase and retire some of its common shares. The net effect of this transaction is a $600,000 change in average operating assets. (Use full amount of scrap while calculating average operating assets. Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) |
| g. |
The company pays a cash dividend to its shareholders, which results in a $600,000 change in average operating assets. (Round intermediate calculation to 2 decimal places. Enter your percentage answer rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) |
Expert Solution
please use this google drive link to download the answer file.
https://drive.google.com/file/d/1KJiJYUyPof6kERIc386pN1NKj6qGRuwy/view?usp=sharing
note: if you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process.
https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
