74) Worsell Inc. reported the following results from last year’s operations:
Sales
$
11,000,000
Variable expenses
8,200,000
Contribution margin
2,800,000
Fixed expenses
2,360,000
Net operating income
$
440,000
Average operating assets
$
5,000,000
–
The company’s minimum required rate of return is 10%. Last year’s residual income was closest
to:
A) $440,000
B) $490,000
C) ($638,000)
D) ($60,000)
Average operating assets
5,000,000
Net operating income
Minimum required return ($5,000,000 × 10%)
Residual income
–
75) Lumsden Inc. has a $1,200,000 investment opportunity with the following characteristics:
Sales
$
2,400,000
Contribution margin ratio
30
% of sales
Fixed expenses
$
600,000
–
The company’s minimum required rate of return is 7%. The residual income for this year’s
investment opportunity is closest to:
A) $120,000
B) $36,000
C) $0
D) $84,000
Contribution margin (30% × $2,400,000)
$
720,000
Fixed expenses
600,000
Net operating income
$
120,000
–
Average operating assets
$
1,200,000
Net operating income
$
Minimum required return ($1,200,000 × 7%)
Residual income
$
–
76) Mike Corporation uses residual income to evaluate the performance of its divisions. The
company’s minimum required rate of return is 14%. In January, the Commercial Products
Division had average operating assets of $970,000 and net operating income of $143,700. What
was the Commercial Products Division’s residual income in January?
A) $7,900
B) ($20,118)
C) $20,118
D) ($7,900)
77) If net operating income is $70,000, average operating assets are $250,000, and the minimum
required rate of return is 16%, what is the residual income?
A) $11,200
B) $40,000
C) $110,000
D) $30,000
78) Salvey Inc. reported the following results from last year’s operations:
Sales
$
7,200,000
Variable expenses
5,550,000
Contribution margin
1,650,000
Fixed expenses
1,146,000
Net operating income
$
504,000
–
The company’s average operating assets were $3,000,000.
At the beginning of this year, the company has a $300,000 investment opportunity that involves
sales of $480,000, fixed expenses of $100,800, and a contribution margin ratio of 30% of sales.
If the company pursues the investment opportunity and otherwise performs the same as last year,
the combined ROI for the entire company will be closest to:
A) 16.6%
B) 1.3%
C) 18.2%
D) 15.3%
Contribution margin (30% × $480,000)
144,000
Fixed expenses
100,800
Net operating income
–
79) 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 minimum required rate of return of 11%, to evaluate the performance of its
divisions. What was the Universal Solutions Division’s residual income in November?
A) ($6,600)
B) $5,082
C) $6,600
D) ($5,082)
80) Bungert Inc. reported the following results from last year’s operations:
Sales
$
15,200,000
Variable expenses
9,470,000
Contribution margin
5,730,000
Fixed expenses
4,818,000
Net operating income
$
912,000
–
The company’s minimum required rate of return is 12% and its average operating assets were
$8,000,000. Last year’s residual income was closest to:
A) $912,000
B) ($48,000)
C) $992,000
D) ($972,800)
Average operating assets
8,000,000
Net operating income
Minimum required return ($8,000,000 × 12%)
Residual income
–
81) Beery Inc. reported the following results from last year’s operations:
Sales
$
11,400,000
Variable expenses
8,180,000
Contribution margin
3,220,000
Fixed expenses
2,422,000
Net operating income
$
798,000
Average operating assets
$
6,000,000
–
At the beginning of this year, the company has a $900,000 investment opportunity with the
following characteristics:
Sales
$
2,880,000
Contribution margin ratio
30
% of sales
Fixed expenses
$
720,000
–
The company’s minimum required rate of return is 12%. If the company pursues the investment
opportunity, this year’s combined residual income for the entire company will be closest to:
A) $848,700
B) $942,000
C) $24,300
D) $114,000
82) Wiswell Inc. reported the following results from last year’s operations:
Sales
$
15,200,000
Variable expenses
9,270,000
Contribution margin
5,930,000
Fixed expenses
5,018,000
Net operating income
$
912,000
The average operating assets were $8,000,000.
At the beginning of this year, the company has a $900,000 investment opportunity that would
involve sales of $2,070,000, a contribution margin ratio of 30% of sales, and fixed expenses of
$538,200. The company’s minimum required rate of return is 10%. If the company pursues the
investment opportunity, this year’s combined residual income for the entire company will be
closest to:
A) $104,800
B) $925,600
C) ($19,800)
D) $994,800
Contribution margin (30% × $2,070,000)
621,000
Fixed expenses
538,200
Net operating income
Average operating assets
8,900,000
Net operating income
Minimum required return ($8,900,000 × 10%)
Residual income
83) Santoyo Corporation keeps careful track of the time required to fill orders. Data concerning a
particular order appear below:
Hours
Wait time
28.0
Process time
1.0
Inspection time
0.4
Move time
3.2
Queue time
5.1
–
The delivery cycle time was:
A) 8.3 hours
B) 3.2 hours
C) 37.7 hours
D) 36.3 hours
84) Schapp Corporation keeps careful track of the time required to fill orders. The times recorded
for a particular order appear below:
Hours
Move time
2.6
Wait time
10.4
Queue time
6.8
Process time
1.5
Inspection time
0.4
–
The throughput time was:
A) 11.3 hours
B) 21.7 hours
C) 17.2 hours
D) 4.5 hours
85) Hunt Company has the following production data:
Throughput time
4
hours
Delivery cycle time
6
hours
Process time
1
hour
Wait time before production
2
hours
–
The manufacturing cycle efficiency (MCE) for Hunt Company is:
A) 50%
B) 25%
C) 20%
D) 75%
86) Pinkton Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
Hours
Move time
3.6
Wait time
13.3
Queue time
5.1
Process time
0.5
Inspection time
0.2
–
The delivery cycle time was:
A) 8.7 hours
B) 3.6 hours
C) 22.0 hours
D) 22.7 hours
87) Simkin Corporation keeps careful track of the time required to fill orders. Data concerning a
particular order appear below:
Hours
Wait time
20.6
Process time
1.9
Inspection time
0.1
Move time
2.7
Queue time
4.8
–
The manufacturing cycle efficiency (MCE) was closest to:
A) 0.46
B) 0.06
C) 0.20
D) 0.19
88) Navern Corporation manufactures and sells custom home elevators. From the time an order
is placed until the time the elevator is installed in the customer’s home averages 90 days. This 90
days is spent as follows:
Wait time
40
days
Inspection time
2
days
Process time
18
days
Move time
20
days
Queue time
10
days
–
What is Navern’s manufacturing cycle efficiency (MCE) for its elevators?
A) 20.0%
B) 36.0%
C) 45.0%
D) 64.0%
89) Tanouye Corporation keeps careful track of the time required to fill orders. Data concerning
a particular order appear below:
Hours
Wait time
12.7
Process time
1.6
Inspection time
0.4
Move time
2.1
Queue time
8.8
–
The throughput time was:
A) 4.1 hours
B) 12.9 hours
C) 25.6 hours
D) 21.5 hours
90) Vandenheuvel Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
Hours
Move time
2.4
Wait time
18.2
Queue time
6.8
Process time
1.8
Inspection time
0.3
–
The manufacturing cycle efficiency (MCE) was closest to:
A) 0.06
B) 0.18
C) 0.62
D) 0.16
91) Gauntlett Inc. reported the following results from last year’s operations:
Sales
$
12,000,000
Variable expenses
9,580,000
Contribution margin
2,420,000
Fixed expenses
1,460,000
Net operating income
$
960,000
Average operating assets
$
5,000,000
–
At the beginning of this year, the company has a $1,300,000 investment opportunity with the
following characteristics:
Sales
$
4,680,000
Contribution margin ratio
50
% of sales
Fixed expenses
$
2,059,200
–
Last year’s turnover was closest to:
A) 0.08
B) 0.42
C) 12.50
D) 2.40
92) Gauntlett Inc. reported the following results from last year’s operations:
Sales
$
12,000,000
Variable expenses
9,580,000
Contribution margin
2,420,000
Fixed expenses
1,460,000
Net operating income
$
960,000
Average operating assets
$
5,000,000
–
At the beginning of this year, the company has a $1,300,000 investment opportunity with the
following characteristics:
Sales
$
4,680,000
Contribution margin ratio
50
% of sales
Fixed expenses
$
2,059,200
–
The turnover for this year’s investment opportunity considered alone is closest to:
A) 16.67
B) 0.06
C) 0.28
D) 3.60