nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes that you increase inventories by 25 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Category Sales Cost of goods sold Variable expenses $ 2,000,000 $ 1,500,000 Current Values Proposed Impact of Inventory Increase 25% (improvement) 0% $ 300,000 10% - reduction Fixed expenses $ 100,000 15% (increase) Inventory $ 300,000 25% + Accounts receivable $ 100,000 0% Other current assets $ 500,000 0% Fixed assets 400,000 0% a. Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.) Category Current Values New Values Sales $ 2,000,000 $ 2,000,258 Cost of goods sold $ 1,500,000 Variable expenses $ 300,000 $ 299,892 Fixed expenses $ 100,000 Inventory $ 300,000 Accounts receivable $ 100,000 SSS $ 100,158 $ 300,258 $ 100,008 Other current assets $ 500,000 Fixed assets $ 400,000 ROA % %

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter3: Cost Behavior
Section: Chapter Questions
Problem 5CE: Refer to Cornerstone Exercise 3.4 for data on Dohini Manufacturing Companys purchasing cost and...
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nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes
that you increase inventories by 25 percent (a major investment to you). She has also given the information in the following table. Use
Figure 2.3.
Category
Sales
Cost of goods sold
Variable expenses
$ 2,000,000
$ 1,500,000
Current Values
Proposed Impact of
Inventory Increase
25% (improvement)
0%
$ 300,000
10%
-
reduction
Fixed expenses
$
100,000
15% (increase)
Inventory
$
300,000
25% +
Accounts receivable
$
100,000
0%
Other current assets
$
500,000
0%
Fixed assets
400,000
0%
a. Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA"
to 2 decimal places.)
Category
Current Values
New Values
Sales
$
2,000,000
$ 2,000,258
Cost of goods sold
$
1,500,000
Variable expenses
$
300,000
$
299,892
Fixed expenses
$
100,000
Inventory
$
300,000
Accounts receivable
$
100,000
SSS
$ 100,158
$ 300,258
$
100,008
Other current assets
$
500,000
Fixed assets
$
400,000
ROA
%
%
Transcribed Image Text:nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes that you increase inventories by 25 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Category Sales Cost of goods sold Variable expenses $ 2,000,000 $ 1,500,000 Current Values Proposed Impact of Inventory Increase 25% (improvement) 0% $ 300,000 10% - reduction Fixed expenses $ 100,000 15% (increase) Inventory $ 300,000 25% + Accounts receivable $ 100,000 0% Other current assets $ 500,000 0% Fixed assets 400,000 0% a. Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.) Category Current Values New Values Sales $ 2,000,000 $ 2,000,258 Cost of goods sold $ 1,500,000 Variable expenses $ 300,000 $ 299,892 Fixed expenses $ 100,000 Inventory $ 300,000 Accounts receivable $ 100,000 SSS $ 100,158 $ 300,258 $ 100,008 Other current assets $ 500,000 Fixed assets $ 400,000 ROA % %
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