Based on the Business Performance calculation below, through extensive outsourcing and OEM effort, the company is able to reduce the Fixed Asset by 50% (i.e., Fixed Asset becomes $1,450), please provide clear calculation on how the 50% reduction of Fixed Asset affects Profit Margin, Asset Turnover Ratio, and ROI.
Business Performance before Improvement
LABOR
$700
SALES
$5,000
MINUS
MATERIALS
$2,300
COGS
NET INCOME
$400
$3,800
DIVIDED BY
PROFIT MARGIN
8%
OVERHEAD
$800
OTHER COSTS
$800
SALES
$5,000
INVENTORY
$500
SALES
$5,000
RECEIVABLE
$300
Current Assets
DIVIDED BY
$1,100
Asset Turnover
Ratio 1.25
Total Assets
PLUS
CASH
$300
$4,000
Fixed Assets
$2,900
MULTIPLY
ROI
10.0%