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The income statement for Huerra Company for last year is provided below. Total Unit Sales $15,200,000 $304.00 Less: Variable expenses 12,160,000 243.20 Contribution margin 3,040,000 60.80 Less: Fixed expense 1,520,000 30.40 Net operating income 1,520,000 30.40 Less: Income taxes @ 30% 456,000 9.12 Net income $ 1,064,000 $ 21.28 The company had average operating assets of $8,000,000 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 19.00% 2. Consider each of the following questions separately and then compute the new ROI 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 (i.e., 0.1234 should be entered as 12.34).) ROI % increase b. The company achieves a savings of S15 per unit by using cheaper materials. (Round intermediate and final answer to 2 decimal places.) ROI % increase c. The company issues bonds and uses the proceeds to purchase machinery and equipment, thus increasing the average assets by $500,000. Interest on the bonds is $50,000 per year. Sales remain unchanged. The new more efficient equipment reduces fixed production costs by $25,000 per year. (Round intermediate and final answer to 2 decimal places.) ROI % decrease T d. As a result of a more intense effort by the sales staff, sales are increased by 10%; operating assets remain unchanged. (Round intermediate and final answer to 2 decimal places.) ROI % increase N e. Obsolete items of inventory carried on the records at a cost of $110,000 are scrapped and sold for 25% of the book value. (Use full amount of scrap while calculating average operating assets. 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 % decrease f. The company uses $500,000 in cash (received on accounts receivable) to repurchase and retire some of its common shares. The net effect of this transaction is a $500,000 change in average operating assets. (Use full amount of scrap while calculating average operating assets. 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 % increase g. The company pays a cash dividend to its shareholders, which results in a $400,000 change in average operating assets. (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 % increase

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