153) Rotan Corporation keeps careful track of the time required to fill orders. The times recorded
for a particular order appear below:
Hours
Move time
3.2
Wait time
10.9
Queue time
5.1
Process time
1.2
Inspection time
0.2
–
The throughput time was:
A) 4.6 hours
B) 9.7 hours
C) 20.6 hours
D) 16 hours
122
154) Rotan Corporation keeps careful track of the time required to fill orders. The times recorded
for a particular order appear below:
Hours
Move time
3.2
Wait time
10.9
Queue time
5.1
Process time
1.2
Inspection time
0.2
–
The manufacturing cycle efficiency (MCE) was closest to:
A) 0.89
B) 0.06
C) 0.29
D) 0.12
123
155) The management of International Cookwares believes that delivery performance measures
must be improved if the company is to maintain its competitive edge. The following data are
considered to be typical of the time to complete orders.
• Process time: 4 days
• Wait time to the start of production: 15 days
• Move time: 3 days
• Inspection time: 2 days
• Queue time during the production process: 8 days
What is the manufacturing cycle efficiency?
A) 12.5%
B) 23.5%
C) 76.4%
D) 87.5%
124
156) The management of International Cookwares believes that delivery performance measures
must be improved if the company is to maintain its competitive edge. The following data are
considered to be typical of the time to complete orders.
• Process time: 4 days
• Wait time to the start of production: 15 days
• Move time: 3 days
• Inspection time: 2 days
• Queue time during the production process: 8 days
What is the delivery cycle time?
A) 4 days
B) 15 days
C) 17 days
D) 32 days
125
157) Kingcade Corporation keeps careful track of the time required to fill orders. Data concerning
a particular order appear below:
Hours
Wait time
18.3
Process time
1.1
Inspection time
0.1
Move time
2.0
Queue time
9.1
–
The throughput time was:
A) 30.6 hours
B) 3.2 hours
C) 27.4 hours
D) 12.3 hours
126
158) Kingcade Corporation keeps careful track of the time required to fill orders. Data concerning
a particular order appear below:
Hours
Wait time
18.3
Process time
1.1
Inspection time
0.1
Move time
2.0
Queue time
9.1
–
The manufacturing cycle efficiency (MCE) was closest to:
A) 0.09
B) 0.12
C) 0.67
D) 0.04
127
159) Kingcade Corporation keeps careful track of the time required to fill orders. Data concerning
a particular order appear below:
Hours
Wait time
18.3
Process time
1.1
Inspection time
0.1
Move time
2.0
Queue time
9.1
–
The delivery cycle time was:
A) 30.6 hours
B) 2 hours
C) 29.4 hours
D) 11.1 hours
128
160) Gabbe Industries is a division of a major corporation. Last year the division had total sales of
$8,910,000, net operating income of $962,280, and average operating assets of $3,000,000. The
company’s minimum required rate of return is 10%.
Required:
a. What is the division’s margin?
b. What is the division’s turnover?
c. What is the division’s return on investment (ROI)?
161) Craycraft Inc. reported the following results from last year’s operations:
Sales
$12,600,000
Variable expenses
9,380,000
Contribution margin
3,220,000
Fixed expenses
2,716,000
Net operating income
$504,000
Average operating assets
$7,000,000
At the beginning of this year, the company has a $800,000 investment opportunity with the
following characteristics:
$560,000
50%
of sales
$246,400
Required:
1. What was last year’s margin? (Round to the nearest 0.1%.)
2. What was last year’s turnover? (Round to the nearest 0.01.)
3. What was last year’s return on investment (ROI)? (Round to the nearest 0.1%.)
4. If the company pursues the investment opportunity and otherwise performs the same as last
year, what will be the overall margin this year? (Round to the nearest 0.1%.)
5. If the company pursues the investment opportunity and otherwise performs the same as last
year, what will be the overall turnover this year? (Round to the nearest 0.01.)
6. If the company pursues the investment opportunity and otherwise performs the same as last
year, what will be the overall ROI will this year? (Round to the nearest 0.1%.)
130
4. If the company pursues the investment opportunity and otherwise performs the same as last
year, the margin will be:
Net operating income of the investment opportunity:
Contribution margin (50% × $560,000)
$280,000
Fixed expenses
246,400
Net operating income
$33,600
Net operating income = $504,000 + $33,600 = $537,600
Sales = $12,600,000 + $560,000 = $13,160,000
Margin = Net operating income ÷ Sales = $537,600 ÷ $13,160,000 = 4.1%
5. If the company pursues the investment opportunity and otherwise performs the same as last
year, the turnover will be:
Sales = $12,600,000 + $560,000 = $13,160,000
Average operating assets = $7,000,000 + $800,000 = $7,800,000
Turnover = Sales ÷ Average operating assets = $13,160,000 ÷ $7,800,000 = 1.69
6. If the company pursues the investment opportunity and otherwise performs the same as last
year, the ROI will be:
ROI = Net operating income ÷ Average operating assets = $537,600 ÷ $7,800,000 = 6.9%
or
ROI = Margin × Turnover = 4.1% × 1.69 = 6.9%
Difficulty: 1 Easy
Topic: Return on Investment
Learning Objective: 11-01 Compute return on investment (ROI) and show how changes in sales,
expenses, and assets affect ROI.
Bloom’s: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
162) Haney Fabrication is a division of a major corporation. Last year the division had total sales
of $21,560,000, net operating income of $1,897,280, and average operating assets of $7,000,000.
The company’s minimum required rate of return is 16%.
Required:
What is the division’s return on investment (ROI)?
163) Wolley Inc. reported the following results from last year’s operations:
Sales
$7,200,000
Variable expenses
5,210,000
Contribution margin
1,990,000
Fixed expenses
1,486,000
Net operating income
$504,000
Average operating assets
$4,000,000
At the beginning of this year, the company has a $1,200,000 investment opportunity with the
following characteristics:
Sales
$1,560,000
Contribution margin ratio
30%
of sales
Fixed expenses
$343,200
The company’s minimum required rate of return is 14%.
Required:
1. What was last year’s margin? (Round to the nearest 0.1%.)
2. What was last year’s turnover? (Round to the nearest 0.01.)
3. What was last year’s return on investment (ROI)? (Round to the nearest 0.1%.)
4. What is the margin related to this year’s investment opportunity? (Round to the nearest 0.1%.)
5. What is the turnover related to this year’s investment opportunity? (Round to the nearest 0.01.)
6. What is the ROI related to this year’s investment opportunity? (Round to the nearest 0.1%.)
7. If the company pursues the investment opportunity and otherwise performs the same as last
year, what will be the overall margin this year? (Round to the nearest 0.1%.)
8. If the company pursues the investment opportunity and otherwise performs the same as last
year, what will be the overall turnover this year? (Round to the nearest 0.01.)
9. If the company pursues the investment opportunity and otherwise performs the same as last
year, what will be the overall ROI will this year? (Round to the nearest 0.1%.)
10. If Westerville’s chief executive officer earns a bonus only if the ROI for this year exceeds the
ROI for last year, would the CEO pursue the investment opportunity? Would the owners of the
company want the CEO to pursue the investment opportunity?
133
134
164) Criner Inc. reported the following results from last year’s operations:
Sales
$16,100,000
Variable expenses
12,330,000
Contribution margin
3,770,000
Fixed expenses
3,126,000
Net operating income
$644,000
Average operating assets
$7,000,000
At the beginning of this year, the company has a $1,800,000 investment opportunity with the
following characteristics:
Sales
$1,980,000
Contribution margin ratio
30%
of sales
Fixed expenses
$475,200
Required:
1. What was last year’s return on investment (ROI)? (Round to the nearest 0.1%.)
2. If the company pursues the investment opportunity and otherwise performs the same as last
year, what will be the overall ROI will this year? (Round to the nearest 0.1%.)
The investment opportunity’s net operating income:
Contribution margin (30% × $1,980,000)
Fixed expenses
Net operating income
135
165) Familia Inc. reported the following results from last year’s operations:
Sales
$16,100,000
Variable expenses
10,400,000
Contribution margin
5,700,000
Fixed expenses
4,734,000
Net operating income
$966,000
Average operating assets
$7,000,000
At the beginning of this year, the company has a $1,200,000 investment opportunity with the
following characteristics:
Sales
$3,840,000
Contribution margin ratio
50%
of sales
Fixed expenses
$1,728,000
The company’s minimum required rate of return is 13%.
Required:
1. What was last year’s return on investment (ROI)? (Round to the nearest 0.1%.)
2. What is the ROI related to this year’s investment opportunity? (Round to the nearest 0.1%.)
3. If the company pursues the investment opportunity and otherwise performs the same as last
year, what will be the overall ROI will this year? (Round to the nearest 0.1%.)
4. If Westerville’s chief executive officer earns a bonus only if the ROI for this year exceeds the
ROI for last year, would the CEO pursue the investment opportunity? Would the owners of the
company want the CEO to pursue the investment opportunity?
136
166) The following data pertains to Timmins Company’s operations last year:
Return on investment (ROI)
20%
Sales
$800,000
Margin
5%
Minimum required rate of return
16%
Required:
a. Compute the company’s average operating assets.
b. Compute the company’s residual income for the year.
Average operating assets
Minimum required rate of return
Minimum required net operating income
Actual net operating income
Minimum required net operating income
Residual income