The contribution format income statement for Huerra Company for last year is given below: The company had average operat

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The contribution format income statement for Huerra Company for
last year is given below:
The company had average operating assets of $507,000 during the
year.
Required:
1. Compute the company’s return on investment (ROI) 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 ROI
figure. Consider each question separately, starting in each case
from the data used to compute the original ROI in (1) above.
2. Using Lean Production, the company is able to reduce the
average level of inventory by $105,000. (The released funds are
used to pay off short-term creditors.)
3. The company achieves a cost savings of $7,000 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
$126,000. Interest on the bonds is $14,000 per year. Sales remain
unchanged. The new, more efficient equipment reduces production
costs by $7,000 per year.
5. As a result of a more intense effort by sales people, sales
are increased by 15%; operating assets remain unchanged.
6. At the beginning of the year, obsolete inventory carried on
the books at a cost of $16,000 is scrapped and written off as a
loss.
7. At the beginning of the year, the company uses $176,000 of
cash (received on accounts receivable) to repurchase and retire
some of its common stock.