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Question;(TCO D) Return on investment (ROI) is equal to the margin;multiplied by;sales.;turnover.;average operating assets.;residual income.;Question 2. Question;(TCO D) For which of the following decisions are opportunity;costs relevant?;The decision to make or buy a needed part;The desision to keep or drop a product line;(A);Yes;Yes;(B);Yes;No;(C);No;Yes;(D);No;No;Choice A;Choice B;Choice C;Choice D;Question 3. Question;(TCO D) Last year, the House of Orange had sales of;$826,650, net operating income of $81,000, and operating assets of $84,000 at;the beginning of the year and $90,000 at the end of the year. What was the;company's turnover, rounded to the nearest tenth?;9.5;10.2;9.8;9.2;(TCO D) Financial data for Beaker Company for last year;appear below.;Beaker Company;Statement of Financial Position;Beginning Ending;Balance Balance;Assets;Cash $50,000 $70,000;Accounts receivable 20,000 25,000;Inventory 30,000 35,000;Plant and Equipment (net) 120,000 110,000;Investment in Cedar Company 80,000 100,000;Land (undeveloped) 170,000 170,000;Total Assets $470,000 510,000;Liabilities and Owners' Equity;Accounts payable $70,000 $90,000;Long-term debt 250,000 250,000;Owner's equity 150,000 170,000;Total liabilities and owner's equity $470,000 $510,000;Beaker Company;Income Statement;Sales $414,000;Less Operating Expenses 351,900;Net Operating Income 62,100;Less Interest and Taxes;Interest Expense $30,000;Tax Expense 10,000 40,000;Net Income $22,000;The company paid dividends of $2,100 last year. The;Investment in Cedar Company" on the statement of financial position;represents an investment in the stock of another company.;Required;i. Compute the company's margin, turnover, and return on;investment for last year.;ii. The board of directors of Beaker Company has set a;minimum required return of 20%. What was the company's residual income last;year?;Question 2. Question;(TCO D) Eber Wares is a division of a major corporation. The;following data are for the latest year of operations.;Sales $30,000,000;Net Operating income $1,170,000;Average operating assets $8,000,000;The company's minimum required rate of return 18%;Required;i. What is the division's margin?;ii. What is the division's turnover?;iii. What is the division's ROI?;iv. What is the division's residual income?;Question 3. Question;(TCO D) Tjelmeland Corporation is considering dropping;product S85U. Data from the company's accounting system appear below.;Sales $360,000;Variable Expenses $158,000;Fixed Manufacturing Expenses $119,000;Fixed Selling and Administrative Expenses $94,000;All fixed expenses of the company are fully allocated to;products in the company's accounting system. Further investigation has revealed;that $55,000 of the fixed manufacturing expenses and $71,000 of the fixed;selling and administrative expenses are avoidable if product S85U is;discontinued.;Required;i. According to the company's accounting system, what is the;net operating income earned by product S85U? Show your work!;ii. What would be the effect on the company's overall net;operating income of dropping product S85U? Should the product be dropped? Show;your work!;Question 4. Question;(TCO D) Fouch Company makes 30,000 units per year of a part;it uses in the products it manufactures. The unit product cost of this part is;computed as follows.;Direct Materials $15.70;Direct Labor $17.50;Variable Manufacturing Overhead $4.50;Fixed Manufacturing Overhead $14.60;Unit Product Cost $52.30;An outside supplier has offered to sell the company all of;these parts it needs for $51.90 a unit. If the company accepts this offer, the;facilities now being used to make the part could be used to make more units of;a product that is in high demand. The additional contribution margin on this;other product would be $219,000 per year.;If the part were purchased from the outside supplier, all of;the direct labor cost of the part would be avoided. However, $6.20 of the fixed;manufacturing overhead cost being applied to the part would continue even if;the part were purchased from the outside supplier. This fixed manufacturing;overhead cost would be applied to the company's remaining products.;Required;i. How much of the unit product cost of $52.30 is relevant;in the decision of whether to make or buy the part?;ii. What is the net total dollar advantage (disadvantage) of;purchasing the part rather than making it?;iii. What is the maximum amount the company should be;willing to pay an outside supplier per unit for the part if the supplier;commits to supplying all 30,000 units required each year?;Question 5. Question;(TCO D) Biello Co. manufactures and sells medals for winners;of athletic and other events. Its manufacturing plant has the capacity to;produce 15,000 medals each month, current monthly production is 14,250 medals.;The company normally charges $115 per medal. Cost data for the current level of;production are shown below.;Variable Costs;Direct Materials $969,000;Direct Labor $270,750;Selling and Administrative $270,075;Fixed Costs;Manufacturing $370,550;Selling and Administrative $89,775;The company has just received a special one-time order for;600 medals at $102 each. For this particular order, no variable selling and;administrative costs would be incurred. This order would also have no effect on;fixed costs.;Required;Should the company accept this special order? Why?


Paper#40736 | Written in 18-Jul-2015

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