the contribution format income statement for westex inc for its most recent period i 557280

The contribution format income statement for Westex, Inc., for its most recent period is given below:

 

      Total   Unit
  Sales $ 994,000 $ 49.70    
  Variable expenses   596,400   29.82    
 



  Contribution margin   397,600   19.88    
  Fixed expenses   319,600   15.98    
 



  Net operating income   78,000   3.90    
  Income taxes @ 40%   31,200   1.56    
 



  Net income $ 46,800 $ 2.34    
 








 

The company had average operating assets of $508,000 during the period.

 

Required:
1.

Compute the company%u2019s return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover. (Round your intermediate calculations and final answers to 2 decimal places.)

 

  ROI %

 

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 original ROI computed in (1) above.

 

2.

The company achieves a cost savings of $15,000 per period by using less costly materials. (Round your intermediate calculations and final answers to 2 decimal places.)

 

    Effect
  Margin %
  Turnover      
  ROI %

 

3.

Using Lean Production, the company is able to reduce the average level of inventory by $100,000. (The released funds are used to pay off bank loans.) (Round your intermediate calculations and final answers to 2 decimal places.)

 

    Effect
  Margin %
  Turnover      
  ROI %

 

4.

Sales are increased by $198,800; operating assets remain unchanged. (Round your intermediate calculations and final answers to 2 decimal places.)

 

    Effect
  Margin %
  Turnover      
  ROI %

 

5.

The company issues bonds and uses the proceeds to purchase $129,000 in machinery and equipment at the beginning of the period. Interest on the bonds is $12,000 per period. Sales remain unchanged. The new, more efficient equipment reduces production costs by $4,000 per period. (Round your intermediate calculations and final answers to 2 decimal places.)

 

    Effect
  Margin %
  Turnover      
  ROI %

 

6.

The company invests $183,000 of cash (received on accounts receivable) in a plot of land that is to be held for possible future use as a plant site. (Round your intermediate calculations and final answers to 2 decimal places.)

 

    Effect
  Margin %
  Turnover      
  ROI %

 

7.

Obsolete inventory carried on the books at a cost of $20,000 is scrapped and written off as a loss.(Round your intermediate calculations and final answers to 2 decimal places.)

 

    Effect
  Margin %
  Turnover      
  ROI %

 

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