Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Question 11 3 / 3 pts In November, the Universal Solutions Division of Keaffaber Corporation had average operating assets of $480,000 and net operating income of $46,200
Question 11
3 / 3 pts
In November, the Universal Solutions Division of Keaffaber Corporation had average operating assets of $480,000 and net operating income of $46,200. The company uses residual income, with a cost of capital of 11%, to evaluate the performance of its divisions. What was the Universal Solutions Division's residual income in November?
$6,600
($6,600)
$5,082
($5,082)
3 / 3 pts
A company that is seeking to increase ROI should attempt to decrease:
average operating assets.
sales.
margin.
turnover.
3 / 3 pts
Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is:
A minimum rate of return does not have to be specified when the residual income approach is used.
Residual income can be computed without having to measure operating assets.
ROI does not take into account both turnover and margin.
Managers are more likely to accept projects that are beneficial to the company.
3 / 3 pts
Residual income:
is the return on investment (ROI) percentage multiplied by average operating assets.
is the net operating income earned above a certain minimum required return on sales.
is the net operating income earned above a certain cost of capital on average operating assets.
will always be greater than zero.
3 / 3 pts
Given the following data:
Average operating assets $250,000
Total liabilities $100,000
Sales $600,000
Contribution margin $150,000
Net operating income $30,000
Return on investment (ROI) would be:
12%
60%
5%
25%
3 / 3 pts
CS Company has a profit margin of 11%. Sales are $320,000, net operating income is $35,200, and average operating assets are $128,000. What is the company's return on investment (ROI)?
11%
2.5%
40%
27.5%
0 / 3 pts
Opportunity costs are:
the same as historical costs.
the same as variable costs.
relevant in decision making.
not used for decision making.
3 / 3 pts
In a sell or process further decision, which of the following costs is relevant?
I. A variable production cost incurred after split-off.
II. A fixed production cost incurred prior to split-off.
Neither I nor II
Only II
Both I and II
Only I
3 / 3 pts
Tish Corporation produces a part used in the manufacture of one of its products. The unit product cost is $26, computed as follows:
| Direct materials |
$10 |
| Direct labor |
7 |
| Variable manufacturing overhead |
1 |
| Fixed manufacturing overhead |
8 |
| Unit product cost |
$26 |
An outside supplier has offered to provide the annual requirement of 5,000 of the parts for only $21 each. The company estimates that 75% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that all other costs are avoidable costs in this decision. Based on these data, the per-unit dollar advantage or disadvantage of purchasing from the outside supplier would be:
$3 advantage
$1 disadvantage
$5 advantage
$4 disadvantage
3 / 3 pts
In a sell or process further decision, consider the following costs:
I. A variable production cost incurred prior to split-off.
II. A variable production cost incurred after split-off.
III. An avoidable fixed production cost incurred after split-off.
Which of the above costs is (are) not relevant in a decision regarding whether the product should be processed further?
Only III
Only I and II
Only I and III
Only I
0 / 20 pts
Oliver's Cat Depot has three operating segments: Food, Toys, and Furniture. The current year's income statement showing the segment operating results are as follows:
| Food | Toys | Furniture | Total | |
| Sales | $3,200,000 | $1,300,000 | $4,500,000 | $9,000,000 |
| Cost of goods sold | 2,650,000 | 760,000 | 3,100,000 | 6,510,000 |
| Gross profit | 550,000 | 540,000 | 1,400,000 | 2,490,000 |
| Direct expenses | 450,000 | 300,000 | 660,000 | 1,410,000 |
| Allocated expenses | 150,000 | 75,000 | 225,000 | 450,000 |
| Net income (loss) | ($50,000) | $165,000 | $515,000 | $630,000 |
After reviewing the current year's results, the CFO is considering dropping the Food segment as it appears to be costing the company money. After further analysis, if the Food segment is dropped sales are not expected to change for the other segments and the allocated expenses will be reallocated to the Toys and Furniture segments.
Required:
a. As the company's cost accountant, prepare an analysis to determine whether or not to drop the Food segment. (You need to show your work.)
b. In addition to the analysis you need to explain to the CFO why you believe the Food segment should be kept or dropped. (Minimum 2-3 sentences)
20 / 20 pts
You are the cost accountant for Misha's Crystal Ball, Inc. In the current year the company had the following financial results:
Sales $1,540,000
Variable expenses 850,000
Contribution margin 690,000
Fixed expenses 237,000
Net operating income $453,000
Average operating assets $3,500,000
The company can invest in new equipment of $550,000 to produce more crystal balls. This new equipment would result in the following increases:
Sales $348,000
Net Income $92,000
The CFO would like to know what the current ROI is for the company and what would be the effect on ROI with the new investment.
Required:
1. What is the return on investment (ROI) for the current year? (Round to the nearest 0.1%.)
2. What is the ROI related to the new equipment investment? (Round to the nearest 0.1%.) (Hint - just the investment opportunity)
3. If the company decides to purchase the new equipement what will be the overall ROI will this year, be sure to include the current year's information? (Round to the nearest 0.1%.)
4. Would you suggest to the CFO to purchase the new equipment based off your above answers (answer either Yes or No)? (Hint - compare #1 and #3)
Expert Solution
Question 11
3 / 3 pts
In November, the Universal Solutions Division of Keaffaber Corporation had average operating assets of $480,000 and net operating income of $46,200. The company uses residual income, with a cost of capital of 11%, to evaluate the performance of its divisions. What was the Universal Solutions Division's residual income in November?
$6,600
Correct!
($6,600)
$5,082
($5,082)
3 / 3 pts
A company that is seeking to increase ROI should attempt to decrease:
Correct!
average operating assets.
sales.
margin.
turnover.
3 / 3 pts
Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is:
A minimum rate of return does not have to be specified when the residual income approach is used.
Residual income can be computed without having to measure operating assets.
ROI does not take into account both turnover and margin.
Correct!
Managers are more likely to accept projects that are beneficial to the company.
3 / 3 pts
Residual income:
is the return on investment (ROI) percentage multiplied by average operating assets.
is the net operating income earned above a certain minimum required return on sales.
Correct!
is the net operating income earned above a certain cost of capital on average operating assets.
will always be greater than zero.
3 / 3 pts
Given the following data:
Average operating assets $250,000
Total liabilities $100,000
Sales $600,000
Contribution margin $150,000
Net operating income $30,000
Return on investment (ROI) would be:
Correct!
12%
60%
5%
25%
3 / 3 pts
CS Company has a profit margin of 11%. Sales are $320,000, net operating income is $35,200, and average operating assets are $128,000. What is the company's return on investment (ROI)?
11%
2.5%
40%
Correct!
27.5%
0 / 3 pts
Opportunity costs are:
the same as historical costs.
You Answered
the same as variable costs.
Correct answer
relevant in decision making.
not used for decision making.
3 / 3 pts
In a sell or process further decision, which of the following costs is relevant?
I. A variable production cost incurred after split-off.
II. A fixed production cost incurred prior to split-off.
Neither I nor II
Only II
Both I and II
Correct!
Only I
3 / 3 pts
Tish Corporation produces a part used in the manufacture of one of its products. The unit product cost is $26, computed as follows:
| Direct materials |
$10 |
| Direct labor |
7 |
| Variable manufacturing overhead |
1 |
| Fixed manufacturing overhead |
8 |
| Unit product cost |
$26 |
An outside supplier has offered to provide the annual requirement of 5,000 of the parts for only $21 each. The company estimates that 75% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that all other costs are avoidable costs in this decision. Based on these data, the per-unit dollar advantage or disadvantage of purchasing from the outside supplier would be:
Correct!
$3 advantage
$1 disadvantage
$5 advantage
$4 disadvantage
3 / 3 pts
In a sell or process further decision, consider the following costs:
I. A variable production cost incurred prior to split-off.
II. A variable production cost incurred after split-off.
III. An avoidable fixed production cost incurred after split-off.
Which of the above costs is (are) not relevant in a decision regarding whether the product should be processed further?
Only III
Only I and II
Only I and III
Correct!
Only I
0 / 20 pts
Oliver's Cat Depot has three operating segments: Food, Toys, and Furniture. The current year's income statement showing the segment operating results are as follows:
| Food | Toys | Furniture | Total | |
| Sales | $3,200,000 | $1,300,000 | $4,500,000 | $9,000,000 |
| Cost of goods sold | 2,650,000 | 760,000 | 3,100,000 | 6,510,000 |
| Gross profit | 550,000 | 540,000 | 1,400,000 | 2,490,000 |
| Direct expenses | 450,000 | 300,000 | 660,000 | 1,410,000 |
| Allocated expenses | 150,000 | 75,000 | 225,000 | 450,000 |
| Net income (loss) | ($50,000) | $165,000 | $515,000 | $630,000 |
After reviewing the current year's results, the CFO is considering dropping the Food segment as it appears to be costing the company money. After further analysis, if the Food segment is dropped sales are not expected to change for the other segments and the allocated expenses will be reallocated to the Toys and Furniture segments.
Required:
a. As the company's cost accountant, prepare an analysis to determine whether or not to drop the Food segment. (You need to show your work.)
b. In addition to the analysis you need to explain to the CFO why you believe the Food segment should be kept or dropped. (Minimum 2-3 sentences)
Your answer:
toys Furniture Total
sales 1,300,000 4,500,000 5,800,000
cost of goods sold 760,000 3,100,000 3,860,000
gross profit 540,000 1,400,000 1,940,000
direct expense 300,000 660,000 960,000
Allocated expenses 112,500 337,500 450,000
Net Income(loss) 127,500 402,500 530,000
food segment should not be dropped.
Food segment should be kept because it is more profit.
this answer closely matches the answer on chegg.
20 / 20 pts
You are the cost accountant for Misha's Crystal Ball, Inc. In the current year the company had the following financial results:
Sales $1,540,000
Variable expenses 850,000
Contribution margin 690,000
Fixed expenses 237,000
Net operating income $453,000
Average operating assets $3,500,000
The company can invest in new equipment of $550,000 to produce more crystal balls. This new equipment would result in the following increases:
Sales $348,000
Net Income $92,000
The CFO would like to know what the current ROI is for the company and what would be the effect on ROI with the new investment.
Required:
1. What is the return on investment (ROI) for the current year? (Round to the nearest 0.1%.)
2. What is the ROI related to the new equipment investment? (Round to the nearest 0.1%.) (Hint - just the investment opportunity)
3. If the company decides to purchase the new equipement what will be the overall ROI will this year, be sure to include the current year's information? (Round to the nearest 0.1%.)
4. Would you suggest to the CFO to purchase the new equipment based off your above answers (answer either Yes or No)? (Hint - compare #1 and #3)
Answer 1:
Correct!12.9%
Correct answer
12.9
Answer 2:
Correct!16.7%
Correct answer
16.7
Answer 3:
Correct!13.5%
Correct answer
13.5
Answer 4:
Correct!Yes
Correct answer
yes
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
