114) Serie Inc. reported the following results from last year’s operations:
Sales
$
16,800,000
Variable expenses
10,640,000
Contribution margin
6,160,000
Fixed expenses
5,488,000
Net operating income
$
672,000
Average operating assets
$
7,000,000
–
At the beginning of this year, the company has a $2,100,000 investment opportunity with the
following characteristics:
Sales
$
2,520,000
Contribution margin ratio
50
Fixed expenses
$
1,108,800
–
The margin for this year’s investment opportunity considered alone is closest to:
A) 56.0%
B) 50.0%
C) 6.0%
D) 44.0%
Contribution margin (50% × $2,520,000)
$
1,260,000
Fixed expenses
1,108,800
Net operating income
$
115) Serie Inc. reported the following results from last year’s operations:
Sales
$
16,800,000
Variable expenses
10,640,000
Contribution margin
6,160,000
Fixed expenses
5,488,000
Net operating income
$
672,000
Average operating assets
$
7,000,000
At the beginning of this year, the company has a $2,100,000 investment opportunity with the
following characteristics:
Sales
$
2,520,000
Contribution margin ratio
50
Fixed expenses
$
1,108,800
If the company pursues the investment opportunity and otherwise performs the same as last year,
the combined margin for the entire company will be closest to:
A) 4.9%
B) 4.3%
C) 0.9%
D) 3.5%
Contribution margin (50% × $2,520,000)
$
1,260,000
Fixed expenses
1,108,800
Net operating income
$
116) Parsa Inc. reported the following results from last year’s operations:
Sales
$
14,000,000
Variable expenses
9,500,000
Contribution margin
4,500,000
Fixed expenses
3,800,000
Net operating income
$
700,000
Average operating assets
$
7,000,000
–
At the beginning of this year, the company has a $1,100,000 investment opportunity with the
following characteristics:
Sales
$
1,980,000
Contribution margin ratio
40
Fixed expenses
$
653,400
–
Last year’s return on investment (ROI) was closest to:
A) 10.0%
B) 5.0%
C) 50.0%
D) 64.3%
117) Parsa Inc. reported the following results from last year’s operations:
Sales
$
14,000,000
Variable expenses
9,500,000
Contribution margin
4,500,000
Fixed expenses
3,800,000
Net operating income
$
700,000
Average operating assets
$
7,000,000
–
At the beginning of this year, the company has a $1,100,000 investment opportunity with the
following characteristics:
Sales
$
1,980,000
Contribution margin ratio
40
Fixed expenses
$
653,400
–
The ROI for this year’s investment opportunity considered alone is closest to:
A) 7.0%
B) 21.2%
C) 12.6%
D) 72.0%
Contribution margin (40% × $1,980,000)
$
792,000
Fixed expenses
653,400
Net operating income
$
138,600
118) Parsa Inc. reported the following results from last year’s operations:
Sales
$
14,000,000
Variable expenses
9,500,000
Contribution margin
4,500,000
Fixed expenses
3,800,000
Net operating income
$
700,000
Average operating assets
$
7,000,000
At the beginning of this year, the company has a $1,100,000 investment opportunity with the
following characteristics:
Sales
$
1,980,000
Contribution margin ratio
40
Fixed expenses
$
653,400
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) 12.0%
B) 8.6%
C) 10.4%
D) 1.7%
Contribution margin (40% × $1,980,000)
$
792,000
Fixed expenses
653,400
Net operating income
$
138,600
119) The Tipton Division of Dudley Company reported the following data last year:
Return on investment
20
%
Minimum required rate of return
12
%
Residual income
$
50,000
–
Tipton Division’s average operating assets last year were:
A) $625,000
B) $250,000
C) $416,677
D) $333,333
120) The Tipton Division of Dudley Company reported the following data last year:
Return on investment
20
%
Minimum required rate of return
12
%
Residual income
$
50,000
–
The division’s net operating income last year was:
A) $250,000
B) $125,000
C) $100,000
D) $75,000
121) The following data pertain to Turk Company’s operations last year:
Sales
$
900,000
Net operating income
$
36,000
Contribution margin
$
150,000
Average operating assets
$
180,000
Stockholders’ equity
$
100,000
Plant, property, & equipment
$
120,000
–
Turk’s return on investment for the year was:
A) 4%
B) 15%
C) 36%
D) 20%
122) The following data pertain to Turk Company’s operations last year:
Sales
$
900,000
Net operating income
$
36,000
Contribution margin
$
150,000
Average operating assets
$
180,000
Stockholders’ equity
$
100,000
Plant, property, & equipment
$
120,000
–
If the residual income for the year was $9,000, the minimum required rate of return must have
been:
A) 15%
B) 4%
C) 20%
D) 36%
123) Robichau Inc. reported the following results from last year’s operations:
Sales
$
6,300,000
Variable expenses
4,930,000
Contribution margin
1,370,000
Fixed expenses
803,000
Net operating income
$
567,000
Average operating assets
$
3,000,000
–
At the beginning of this year, the company has a $900,000 investment opportunity with the
following characteristics:
Sales
$
1,530,000
Contribution margin ratio
30
Fixed expenses
$
306,000
–
The company’s minimum required rate of return is 20%.
Last year’s return on investment (ROI) was closest to:
A) 47.6%
B) 18.9%
C) 9.0%
D) 45.7%
124) Robichau Inc. reported the following results from last year’s operations:
Sales
$
6,300,000
Variable expenses
4,930,000
Contribution margin
1,370,000
Fixed expenses
803,000
Net operating income
$
567,000
Average operating assets
$
3,000,000
At the beginning of this year, the company has a $900,000 investment opportunity with the
following characteristics:
Sales
$
1,530,000
Contribution margin ratio
30
Fixed expenses
$
306,000
The company’s minimum required rate of return is 20%.
The ROI for this year’s investment opportunity considered alone is closest to:
A) 51.0%
B) 50.0%
C) 10.0%
D) 17.0%
Contribution margin (30% × $1,530,000)
$
459,000
Fixed expenses
306,000
Net operating income
$
153,000
125) Robichau Inc. reported the following results from last year’s operations:
Sales
$
6,300,000
Variable expenses
4,930,000
Contribution margin
1,370,000
Fixed expenses
803,000
Net operating income
$
567,000
Average operating assets
$
3,000,000
At the beginning of this year, the company has a $900,000 investment opportunity with the
following characteristics:
Sales
$
1,530,000
Contribution margin ratio
30
Fixed expenses
$
306,000
The company’s minimum required rate of return is 20%.
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) 3.9%
B) 24.0%
C) 14.5%
D) 18.5%
Contribution margin (30% × $1,530,000)
$
459,000
Fixed expenses
306,000
Net operating income
$
153,000
126) Robichau Inc. reported the following results from last year’s operations:
Sales
$
6,300,000
Variable expenses
4,930,000
Contribution margin
1,370,000
Fixed expenses
803,000
Net operating income
$
567,000
Average operating assets
$
3,000,000
–
At the beginning of this year, the company has a $900,000 investment opportunity with the
following characteristics:
Sales
$
1,530,000
Contribution margin ratio
30
Fixed expenses
$
306,000
The company’s minimum required rate of return is 20%.
Last year’s residual income was closest to:
A) $567,000
B) $597,000
C) ($33,000)
D) ($686,700)
Average operating assets
$
3,000,000
Net operating income
$
567,000
Minimum required return ($3,000,000 × 20%)
600,000
Residual income
$
)
127) Robichau Inc. reported the following results from last year’s operations:
Sales
$
6,300,000
Variable expenses
4,930,000
Contribution margin
1,370,000
Fixed expenses
803,000
Net operating income
$
567,000
Average operating assets
$
3,000,000
At the beginning of this year, the company has a $900,000 investment opportunity with the
following characteristics:
Sales
$
1,530,000
Contribution margin ratio
30
Fixed expenses
$
306,000
The company’s minimum required rate of return is 20%.
The residual income for this year’s investment opportunity when considered alone is closest to:
A) $0
B) $179,100
C) $153,000
D) ($27,000)
Contribution margin (30% × $1,530,000)
$
459,000
Fixed expenses
306,000
Net operating income
$
153,000
Average operating assets
$
900,000
Net operating income
$
153,000
Minimum required return ($900,000 × 20%)
180,000
Residual income
$
)
128) Robichau Inc. reported the following results from last year’s operations:
Sales
$
6,300,000
Variable expenses
4,930,000
Contribution margin
1,370,000
Fixed expenses
803,000
Net operating income
$
567,000
Average operating assets
$
3,000,000
At the beginning of this year, the company has a $900,000 investment opportunity with the
following characteristics:
Sales
$
1,530,000
Contribution margin ratio
30
Fixed expenses
$
306,000
The company’s minimum required rate of return is 20%.
If the company pursues the investment opportunity, this year’s combined residual income for the
entire company will be closest to:
A) $776,100
B) ($17,100)
C) $720,000
D) ($60,000)
129) Edith Carolina is president of the Deed Corporation. The company is decentralized, and
leaves investment decisions up to the discretion of the division managers. Michael Sanders,
manager of the Cosmetics Division, has had a return on investment of 14% for his division for
the past three years and expects the division to have the same return in the coming year. Sanders
has the opportunity to invest in a new line of cosmetics which is expected to have a return on
investment of 12%. The company’s minimum required rate of return is 8%.
Suppose Deed Corporation evaluates managerial performance using return on investment. Edith
Carolina, as president of the company, may view the opportunity for taking on the cosmetics line
differently from Michael Sanders, manager of the Cosmetics Division. What action would each
of them prefer with respect to the decision of whether to take on the new cosmetics line?
Carolina
Sanders
A)
accept
reject
B)
reject
accept
C)
accept
accept
D)
reject
reject
–
A) Choice A
B) Choice B
C) Choice C
D) Choice D
130) Edith Carolina is president of the Deed Corporation. The company is decentralized, and
leaves investment decisions up to the discretion of the division managers. Michael Sanders,
manager of the Cosmetics Division, has had a return on investment of 14% for his division for
the past three years and expects the division to have the same return in the coming year. Sanders
has the opportunity to invest in a new line of cosmetics which is expected to have a return on
investment of 12%. The company’s minimum required rate of return is 8%.
If the Deed Corporation evaluates managerial performance using residual income based on the
corporate minimum required rate of return of 8%, what decision would be preferred by Edith
Carolina and Michael Sanders?
Carolina
Sanders
A)
accept
reject
B)
reject
accept
C)
accept
accept
D)
reject
reject
–
A) Choice A
B) Choice B
C) Choice C
D) Choice D
131) Dacker Products is a division of a major corporation. The following data are for the most
recent year of operations:
Sales
$
36,480,000
Net operating income
$
2,808,960
Average operating assets
$
8,000,000
The company’s minimum required rate of return
16
%
–
The division’s margin used to compute ROI is closest to:
A) 29.6%
B) 35.1%
C) 21.9%
D) 7.7%
132) Dacker Products is a division of a major corporation. The following data are for the most
recent year of operations:
Sales
$
36,480,000
Net operating income
$
2,808,960
Average operating assets
$
8,000,000
The company’s minimum required rate of return
16
%
–
The division’s turnover used to compute ROI is closest to:
A) 4.56
B) 12.99
C) 3.37
D) 0.35