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(TCO D) Which of the following performance measures will decrease if there is an increase in the accounts receivable?;Return on Investment Residual Income;(A);Yes;Yes;(B);No;Yes;(C);Yes;No;(D);No;No (Points: 5) Choice A;Choice B;Choice C;Choice D;Question 2. 2. (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 (Points: 5) Choice A;Choice B;Choice C;Choice D;Question 3. 3. (TCO D) For which of the following decisions are sunk costs relevant? (Points: 5) The decision to keep an old machine or buy a new one;The decision to sell a product at the split-off point or after further processing;The decision to accept or reject a special order offer;All of the above;None of the above;1. (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? (Points: 15);Question 2. 2. (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? (Points: 15);Question 3. 3. (TCOD) The management of Thews Corporation is considering dropping product E28I. Data from the company's accounting system appear below.;Sales $480,000;Variable Expenses $202,000;Fixed Manufacturing Expenses $158,000;Fixed Selling and Administrative Expenses $130,000;All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $86,000 of the fixed manufacturing expenses and $67,000 of the fixed selling and administrative expenses are avoidable if product E28I is discontinued.;Required;i. What is the net operating income earned by product E28I according to the company's accounting system? Show your work!;ii. What would be the effect on the company's overall net operating income of dropping product E28I? Should the product be dropped? Show your work! (Points: 15);Question 4. 4. (TCO D) Rosiek Corporation uses part A55 in one of its products. The company's accounting department reports the following costs of producing the 4,000 units of the part that are needed every year.;Per Unit;Direct Materials $2.80;Direct Labor $6.30;Variable Overhead $8.50;Supervisor's Salary $2.60;Depreciation of Special Equipment $6.80;Allocated General Overhead $6.10;An outside supplier has offered to make the part and sell it to the company for $32.30 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $4,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part A55 could be used to make more of one of the company's other products, generating an additional segment margin of $26,000 per year for that product.;Required;i. Prepare a report that shows the effect on the company's total net operating income of buying part A55 from the supplier rather than continuing to make it inside the company.;ii. Which alternative should the company choose? (Points: 15);Question 5. 5. (TCO D) A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each. The normal selling price of this product is $48.00 each. The normal unit product cost of product M97 is computed as follows.;Direct Materials $18.50;Direct Labor $1.20;Variable manufacturing overhead $8.40;Fixed manufacturing overhead $3.90;Unit product cost $32.00;Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.;Required;Determine the effect on the company's total net operating income of accepting the special order. Show your work! (Points: 15)

 

Paper#76897 | Written in 18-Jul-2015

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