Question

The income statement for Huerra Company for last year is provided below: Sales Less: Variable expenses Total $43,200,000 25,920,000 Unit $432.00 259.20 Contribution margin Less: Fixed expense 17,280,000 8,640,000 172.80 86.40 Net operating income Less: Income taxes @ 30% 8,640,000 2,592,000 86.40 25.92 Net income $ 6,048,000 $ 60.48 The company had average operating assets of $18,000,000 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).) ROI

Answer 1

Return On Investment ( ROI)
	= Net Income / Average Operating Assets
Answers:
1)	=$6048000/18000000
	33.60%
2)
a)
	Revised Average Operating Assets =$18000000-300000 =$17700000
	ROI = $6048000/17700000
	34.17%
b)	Saving $22 per unit
	Number Of Units = $43200000/432
	=100000 Units
	Revised Net Income = $6048000 + [100000 units *22* (1-0.30)]
		=6048000+1540000
		$           75,88,000
	ROI = $7588000/$18000000
	42.16%
c)
	Revised Average Asset = $18000000+200000
		$       1,82,00,000
	Revised Net Income = $6048000-[(20000-10000)*(1-0.3)
		$           60,41,000
	ROI = $6041000/18200000
	33.19%
d	Revised Net Income = $6048000+ [(17280000*20%)*(1-0.3)
		$           84,67,200
	ROI = $8467200/18000000
	47.04%
e)	Revised Net Income = $6048000 - [(170000*85%)*(1-0.3)
		$           59,46,850
	ROI = $5946850/18000000
	33.04%
f)	Revised Operating Assets
	=$18000000-600000
	$       1,74,00,000
	ROI = $6048000/17400000
	34.76%

Let me know wrong answer, if any.