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%