Rate of return, ROI = Profit margin x Asset turn over
= (Net operating income/Sales) x (Sales/Average operating assets)
1.
Profit margin = $ 82,000/$ 1,008,000 = 0.0813492063492064 or 8.13 %
Asset turn over = $ 1,008,000/$ 496,000 = 2.03225806451613 or 2.03
ROI = 8.13 % x 2.03 = 16.5039 % or 16.50 %
2.
Profit margin = $ 82,000/$ 1,008,000 = 0.0813492063492064 or 8.13 % Unchanged
Asset turn over = $ 1,008,000/ ($ 496,000 - $ 92,000) = $ 1,008,000/$ 404,000
= 2.4950495049505 or 2.50 Increased
ROI = 8.13 % x 2.50 = 20.325 % or 20.33 % Increased
3.
Profit margin = ($ 82,000+ $ 14,000)/$ 1,008,000 = $ 96,000/$ 1,008,000
=0.0952380952380952 or 9.52 % Increased
Asset turn over = $ 1,008,000/$ 496,000 = 2.03225806451613 or 2.03 Unchanged
ROI = 9.52 % x 2.03 = 19.3256 % or 19.33 % Increased
4.
Profit margin = ($ 82,000 + $ 7,000)/$ 1,008,000 = $ 89,000/$ 1,008,000
= 0.0882936507936508 or 8.83 % Increased
Asset turn over = $ 1,008,000/ ($ 496,000 + $ 129,000) = $ 1,008,000/$ 625,000
= 1.6128 or 1.61 Decreased
ROI = 8.83 % x 1.61 = 14.2163 % or 14.22 % Decreased
* Interest expense is finance activity and is not considered to compute net operating income.
5.
Sales ($1,008,000 x 1.2) |
$ 1,209,600 |
Variable cost ($ 604,800 x 1.2) |
$ 725,760 |
Contribution margin |
$ 483,840 |
Fixed expenses |
$ 321,200 |
Net operating income |
$ 162,640 |
Profit margin = $ 162,640 / $ 1,209,600 = 0.134457671957672 or 13.45 % Increased
Asset turn over = $ 1,209,600/$ 496,000 = 2.43870967741935 or 2.44 Increased
ROI = 13.45 % x 2.44 = 32.818 % or 32.82 % Increased
*** Answered for 4 +1 sub-parts against minimum 4 sub-parts of Chegg’s policy.
The contribution format income statement for Huerra Company for last year is given below: Total U...