The contribution format income statement for Huerra Company for last year is giv

Question

The contribution format income statement for Huerra Company for last year is given below: Total Unit Sales Variable expenses Contribution margin Fixed expenses Net operating income Income taxes @ 40% Net income $998,000 598,800 399,200 317.200 82,000 32,800 $49,200 $ 49.90 29.94 19.96 15.86 4.10 1.64 $ 2.46 The company had average operating assets of $497,000 during the year Required 1. Compute the company's return on investment (ROI) for the period using the ROl formula stated in terms of margin and turnover. (Round your intermediate calculations and final answer to 2 decimal places.) Margin Turnover ROI

Explanation / Answer

1

Margin

Net Operating income/ Sales

82000/998000

8.22%

Turnover

Sales/Average operating assets

998000/497000

2.01

ROI

Margin

8.22%

Turnover

2.01

ROI

16.51%

2

Margin

Net Operating income/ Sales

82000/998000

8.22%

Turnover

Sales/Average operating assets

998000/(497000-94000)

2.47

ROI

Margin

8.22%

Turnover

2.47

ROI

20.30%

3

Income will increase by $15000

Margin

Net Operating income/ Sales

(82000+15000)/998000

9.72%

Turnover

Sales/Average operating assets

998000/497000

2.01

ROI

Margin

9.72%

Turnover

2.01

ROI

19.52%

4

Operating income will increase by$5000 due to reduction in production costs

(82000+5000)/998000

8.72%

Turnover

Average operating assets will increase by $129000

998000/(497000+129000)

998000/626000

1.59

ROI

Margin

8.72%

Turnover

1.59

ROI

13.90%

1

Margin

Net Operating income/ Sales

82000/998000

8.22%

Turnover

Sales/Average operating assets

998000/497000

2.01

ROI

Margin

8.22%

Turnover

2.01

ROI

16.51%

2

Margin

Net Operating income/ Sales

82000/998000

8.22%

Turnover

Sales/Average operating assets

998000/(497000-94000)

2.47

ROI

Margin

8.22%

Turnover

2.47

ROI

20.30%

3

Income will increase by $15000

Margin

Net Operating income/ Sales

(82000+15000)/998000

9.72%

Turnover

Sales/Average operating assets

998000/497000

2.01

ROI

Margin

9.72%

Turnover

2.01

ROI

19.52%

4

Operating income will increase by$5000 due to reduction in production costs

(82000+5000)/998000

8.72%

Turnover

Average operating assets will increase by $129000

998000/(497000+129000)

998000/626000

1.59

ROI

Margin

8.72%

Turnover

1.59

ROI

13.90%

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