Please, explain step by step. Thank you! The contribution format income statemen

Question

Please, explain step by step. Thank you!

The contribution format income statement for Huerra Company for last year is given below: Total Sales Variable expenses Unit $ 994,000 $49.70 596,400 29.82 Contribution margin Fixed expenses 397,600 19.88 317,600 15.88 Net operating income Income taxes @ 40% 80,000 32,000 4.00 1.60 Net income $ 48,000 $ 2.40 The company had average operating assets of $497,000 during the year Required 1. Compute the company's return on investment (ROl) for the period using the ROl formula stated in terms of margin and turnover. (Round your Turnover answer to 2 decimal places. Round your Margin and ROl percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) Margin Turnover ROI

Explanation / Answer

ans 1 Margin A 80000/994000*100 8.05 % Net operating income/sales*100 Turnover B Sales/Average operating assets 994000/497000 2.00 ROI A*B 2*8.05 16.10 % ans 2 Effect Margin A 80000/994000*100 8.05 % Unchanged Net operating income/sales*100 Turnover B Sales/Average operating assets 994000/(497000-109000) 2.56 Increase` ROI A*B 2.56*8.05 20.61 % Increase` ans 3 Effect Margin A 90000/994000*100 9.05 % Increase` Net operating income/sales*100 Turnover B Sales/Average operating assets 994000/497000 2.00 Unchanged ROI A*B 2*9.05 18.10 % Increase` ans 4 Effect Margin A 83000/994000*100 8.35 % Increase` Net operating income/sales*100 Turnover B Sales/Average operating assets 994000/497000 2.00 Unchanged ROI A*B 2*8.35 16.70 % Increase`

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