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 $ 998,000 598,800 399,200 319,200 80,000 32,000 $48,000 $ 49.90 29.94 19.96 15.96 4.00 1.60 $ 2.40 The company had average operating assets of $510,000 during the year.

Answer 1

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Existing:
Mergin	48000/998000	4.81%
Net Opertaing Income/Sales
Turnover	998000/510000	1.96
Sales/Average Operating Assets
Return on Investment	4.81%*1.96	9.41%
Margin*Turnover
Part - 5
Mergin	71952/1097800	6.55%	Increased
Net Opertaing Income/Sales
Turnover	1097800/510000	2.15	Increased
Sales/Average Operating Assets
Return on Investment	6.55%*2.15	14.11%	Increased
Margin*Turnover
Working:
Sales	$                         1,097,800	incrase by 10%
Less: Variable Cost	$                             658,680	incrase by 10%
Cont Margin	$                             439,120
Less: Fixed Cost	$                             319,200
Net Operating Income	$                             119,920
Less: Tax 40%	$                               47,968
Net Income	$                               71,952
Part - 6
Mergin	(48000-17000)/998000	3.11%	Decreaed
Net Opertaing Income/Sales
Turnover	998000/(510000-17000)	2.02	Increased
Sales/Average Operating Assets
Return on Investment	3.11%*2.02	6.29%	Decreaed
Margin*Turnover
Part - 7
Mergin	48000/998000	3.11%	Same
Net Opertaing Income/Sales
Turnover	998000/(510000-180000)	3.02	Increased
Sales/Average Operating Assets
Return on Investment	3.11%*3.02	9.39%	Decreased
Margin*Turnover