need answers for c,e,f and g The income statement for Huerra Company for last ye
ID: 2438694 • Letter: N
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need answers for c,e,f and g
The income statement for Huerra Company for last year is provided below: Total Unit Sales Less: Variable expenses $28,900,000 $289.00 17,340,000 173.40 Contribution margin Less: Fixed expense 11,560,000 5,780,000 115.60 57.80 Net operating income Less. Income taxes @ 30% 5,780,000 1,734,000 57.80 17.34 Net income $4,046,000 40.46 The company had average operating assets of $17,000,000 during the year Required: 1. Compute the company's ROl for the period using the ROl 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.) Answer is complete and correct. ROI 34.00% 2. Consider each of the following questions separately and then compute the new ROl 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 $500,000. (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 (ie., 0.1234 should be entered as 12.34).) Answer is complete and correct. ROI 35.00 % !increaseExplanation / Answer
Answer to Part c.
Return on Investment = Margin * Turnover
Margin = Net Income / Sales * 100
Turnover = Sales / Average Operating Assets
Expected Fixed Cost = $5,780,000 - $30,000 + $60,000
Expected Fixed Cost = $5,810,000
Expected Net Operating Income = $28,900,000 - $17,340,000 - $5,810,000
Expected Net Operating Income = $5,810,000
Expected Net Income = $5,810,000 – ($5,810,000 * 30%)
Expected Net Income = $4,067,000
Expected Average Operating Assets = $17,000,000 + $600,000
Expected Average Operating Assets = $17,600,000
Margin = 4,067,000 / 28,900,000 * 100
Margin = 14.07%
Turnover = 28,900,000 / 17,600,000
Turnover = 1.64
Return on Investment = 14.07% * 1.64
Return on Investment = 23.07% (Decrease)
Answer to Part e.
Return on Investment = Margin * Turnover
Margin = Net Income / Sales * 100
Turnover = Sales / Average Operating Assets
Expected Average Operating Assets = $17,000,000 - $100,000 + $10,000
Expected Average Operating Assets = $16,910,000
Margin = 4,046,000 / 28,900,000 * 100
Margin = 14.00%
Turnover = 28,900,000 / 16,910,000
Turnover = 1.71
Return on Investment = 14.00% * 1.71
Return on Investment = 23.94% (Decrease)
Answer to Part f.
Return on Investment = Margin * Turnover
Margin = Net Income / Sales * 100
Turnover = Sales / Average Operating Assets
Expected Average Operating Assets = $17,000,000 - $300,000
Expected Average Operating Assets = $16,700,000
Margin = 4,046,000 / 28,900,000 * 100
Margin = 14.00%
Turnover = 28,900,000 / 16,700,000
Turnover = 1.73
Return on Investment = 14.00% * 1.73
Return on Investment = 24.22% (Decrease)
Answer to Part g.
Return on Investment = Margin * Turnover
Margin = Net Income / Sales * 100
Turnover = Sales / Average Operating Assets
Expected Average Operating Assets = $17,000,000 - $200,000
Expected Average Operating Assets = $16,800,000
Margin = 4,046,000 / 28,900,000 * 100
Margin = 14.00%
Turnover = 28,900,000 / 16,800,000
Turnover = 1.72
Return on Investment = 14.00% * 1.72
Return on Investment = 24.08% (Decrease)
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