Solve the investments and cost volume profit analysis

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Reference no: EM1312579

Objective type questions on investments and cost volume profit analysis

1. Frame Corporation's Maintenance Department provides services to the company's two operating divisions-the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are determined by the number of cases produced by the operating departments during the peak period. Data appear below:

Maintenance Department

 

Budgeted Variable cost

$6 per case

Budgeted total fixed cost

$ 328,000

Actual total variable cost

$254,014

Actual total fixed cost

$331,940

Paints division

 

Percentage of peak period capacity required

35%

Budgeted cases

12,000

Actual cases

12,010

Stains division

 

Percentage of peak period capacity required

65%

Budgeted cases

29,000

Actual cases

28,960

How much actual Maintenance Department cost should not be allocated to the operating divisions at the end of the year?

  1. $12,134
  2. b $8,194
  3. $0
  4. $3,940

2. Azotea Corporation has two operating divisions - a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. The variable costs of the Order Fulfillment Department are budgeted at $56 per order. The Order Fulfillment Department's fixed costs are budgeted at $233,700 for the year. The fixed costs of the Order Fulfillment Department are budgeted based on the peak period orders.

 

Percentage of Peak Period Capacity required

Budgeted Orders

Consumer Division

40%

1.200

Commercial division

60%

2,900

At the end of the year, actual Order Fulfillment Department variable costs totaled $237,390 and fixed costs totaled $239,140. The Consumer Division had a total of 1,240 orders and the Commercial Division had a total of 2,860 orders for the year. How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year?

  1. $300,380
  2. b $309,078
  3. $332,409
  4. $323,180

3. Cecille Products is a division of a major corporation. Last year the division had total sales of $7,940,000, net operating income of $254,080, and average operating assets of $2,000,000. The company's minimum required rate of return is 12%. The division's turnover is closest to:

  1. 0.13
  2. b 3.52
  3. 3.97
  4. 31.25

4. Last year the Uptown Division of Gorcen Enterprises had sales of $300,000 and a net operating income of $24,000. The average operating assets at Uptown last year amounted to $120,000. Last year at Uptown the return on investment was:

  1. 8%
  2. b 12%
  3. 20%
  4. 40%

5. Last year the Uptown Division of Gorcen Enterprises had sales of $300,000 and a net operating income of $24,000. The average operating assets at Uptown last year amounted to $120,000. At Uptown the turnover last year was:

  1. 0.4
  2. b 2.5
  3. 3.2
  4. 5.0

6. The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%. What was the Consumer Products Division's minimum required return in May?

  1. $81,300
  2. b $8,130
  3. $88,130
  4. $80,000

7. Azuki Corporation operates in two sales territories, urban and rural. Shown below is last year's income statement segmented by territory:

 

Urban

Rural

Sales

$320,000

$80,000

Variable expenses

208,000

56,000

Contribution margin

112,000

24,000

Traceable fixed expenses

48,000

30,000

Segment margin

$64,000

$(6,000)

Azuki's common fixed expenses were $25,000 last year. If urban sales were 10% higher last year, by approximately how much would Azuki's net operating income have increased? (Assume no change in the revenue or cost structure.)

  1. $4,400
  2. b $6,400
  3. $11,200
  4. $32,000

8. 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

Stock holder's equity

$100,000

Plant, property & equipment

$120,000

Turk's return on investment for the year was:

  1. 4%
  2. b 15%
  3. 36%
  4. 20%

Reference no: EM1312579

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