Management at kelsh is pondering the elimination of north

Reference no: EM13577469

Cress Company makes four products in a single facility. Data concerning these products appear below:

	Products
	A	B	C	D
Selling price per unit	$53.9	$44.8	$46.1	$54.8
Variable manufacturing cost per unit	$16.3	$10.1	$12.4	$11.7
Variable selling cost per unit	$3.2	$4.5	$3.3	$5.3
Milling machine minutes per unit	5.6	4.4	2.8	2.8
Monthly demand in units	3,000	3,000	3,000	4,000

The milling machines are potentially the constraint in the production facility. A total of 36,500 minutes are available per month on these machines.
Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Do not round your intermediate calculations. Round off to the nearest whole cent.)

	$6.14
	$30.20
	$34.40
	$30.40

14)Laro Corporation produces and sells a single product with the following characteristics:

	Per unit	Percent of sales
Selling price	$ 230	100%
Variable expenses	115	50%
Contribution margin	$ 115	50%

The company is currently selling 5,800 units per month. Fixed expenses are $326,000 per month.

The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $48,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 180 units. What should be the overall effect on the company's monthly net operating income of this change?

	increase of $681,880
	increase of $14,880
	decrease of $81,120
	increase of $47,820

1) Jackie Chin Waste Management has a subsidiary that disposes of hazardous waste and a subsidiary that collects and disposes of residential garbage. Information related to the two subsidiaries follows:

Hazardous Residential

Waste Waste

Total assets $12,000,000 $72,000,000

Noninterest-bearing current liabilities 3,000,000 12,000,000

Net income 1,700,000 6,000,000

Interest expense 1,250,000 2,300,000

Required rate of return 8% 10%

Tax rate 35% 40%

Based on the limited information, which subsidiary is the best candidate for expansion?

	Hazardous waste, because it has a higher residual income.
	Hazardous waste, because it has a higher return on investment
	Residential waste, because it has a higher residual income.
	Residential waste, because it has a higher return on investment

2) NOPAT (net operating profit after tax or net income plus net interest) is used for the return number in the return on investment formula because:

	investment center managers should be evaluated based on the return earned on the assets used since they do not have responsibility for long term financing decisions.
	NOPAT represents the return to stockholders equity only, and divisions generally are free to issue stock.
	NOPAT represents the return to debt capital only, and division managers generally are free to issue debt.
	All of the above.

25) The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses:

	North	South
Sales	$980,000	$888,000
Variable expenses	486,000	324,000
Traceable fixed expenses	308,000	250,000
Allocated common corporate expenses	248,000	198,000
Net operating income (loss)	$(62,000)	$116,000

Management at Kelsh is pondering the elimination of North Division. If North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, the elimination of North Division would result in an overall company net operating income (loss) of:

	$116,000
	$178,000
	$(132,000)
	$54,000

Reference no: EM13577469

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