Ac 505 Week 6 Quiz

Ac 505 Week 6 Quiz

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(TCO D) A company that has a profit can increase its return on investment by (Points: 5) increasing sales revenue and operating expenses by the same dollar amount. increasing average operating assets and operating expenses by the same dollar amount. increasing sales revenue and operating expenses by the same percentage. decreasing average operating assets and sales by the same percentage. 2. (TCO D) Given the following data, what would ROI be? Sales 50,000 Net operating income 5,000 Contribution margin 20,000 Average operating assets 25,000 Stockholder’s equity 15,000 (Points: 5) 10 20 16. 7 80. (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? (Points: 5) 9. 5 10. 2 9. 8 9. 2 1. (TCO D) Seebach Corporation has two major business segments—Apparel and Accessories. Data concerning those segments for June appear below. Sales revenues, Apparel 700,000 Variable expenses, Apparel 406,000 Traceable fixed expenses, Apparel 98,000 Sales revenues, Accessories 710,000 Variable expenses, Accessories 312,000

Traceable fixed expenses, Accessories 107,000 Common fixed expenses totaled 292,000 and were allocated as follows: 155,000 to the Apparel business segment and 137,000 to the Accessories business segment. Required: Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts. (Points: 15) 2. (TCO D) Ferro Wares is a division of a major corporation. The following data are for the latest year of operations. Sales 33,040,000 Net Operating Income 1,453,760 Average Operating Assets 8,000,000 The company’s minimum required rate of return 18 Required: i.

What is the division’s ROI? . What is the division’s residual income? (Points: 15) 3. (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! . 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! (Points: 15) 4. (TCO D) Part F77 is used in one of Wilcutt Corporation’s products. The company’s Accounting Department reports the following costs of producing the 7,000 units of the part that are needed every year. Per Unit Direct Materials 7. 00 Direct Labor 6. 0 Variable Overhead 5. 60 Supervisor’s Salary 4. 70 Depreciation of Special Equipment 1. 50 Allocated General Overhead 5. 40 An outside supplier has offered to make the part and sell it to the company for 28. 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 9,000 of these allocated general overhead costs would be

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avoided. Required: i. Prepare a report that shows the effect on the company’s total net operating income of buying part F77 from the supplier rather than continuing to make it inside the company. . Which alternative should the company choose? (Points: 15) 5. (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? (Points: 15)

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