Devry acct 505 week 6 quiz segment reporting and relevant costs for decisions
1. DEVRY ACCT 505 Week 6 Quiz Segment Reporting
and Relevant Costs for Decisions
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Question :
(TCO D) Return on investment (ROI) is equal to the
margin multiplied by
2.
Question :
(TCO D) For which of the following decisions are
opportunity costs relevant?
The decision to make or buy a needed part
The desision to keep or drop a product line
(A)
Yes
Yes
(B)
Yes
No
(C)
2. No
Yes
(D)
No
No
3.
Question :
(TCO D) Last year, the House of Orange had sales of
$826,650, net operating income of $81,000, and
operating assets of $84,000 at the beginning of the
year and $90,000 at the end of the year. What was
the company's turnover, rounded to the nearest
tenth?
1.
Question :
(TCO D) Data for December concerning
Dinnocenzo Corporation's two major business
segments-Fibers and Feedstocks-appear below:
Sales revenues, Fibers
$870,000
Sales revenues, Feedstocks
$820,000
Variable expenses, Fibers
$426,000
Variable expenses, Feedstocks
$344,000
Traceable fixed expenses, Fibers
3. $148,000
Traceable fixed expenses, Feedstocks
S156,000
Common fixed expenses totaled $314,000 and
were allocated as follows: $129,000 to the Fibers
business segment and $185,000 to the Feedstocks
business segment.
Required:
Prepare a segmented income statement in the
contribution format for the company. Omit
percentages; show only dollar amounts.
2.
Question :
(TCO D) Wryski Corporation had net operating
income of $150,000 and average operating assets
of $500,000. The company requires a return on
investment of 19%.
Required:
i. Calculate the company's current return on
investment and residual income.
ii. The company is investigating an investment of
$400,000 in a project that will generate annual net
4. operating income of $78,000. What is the ROI of
the project? What is the residual income of the
project? Should the company invest in this project?
3.
Question :
(TCO D) Tjelmeland Corporation is considering
dropping product S85U. Data from the company's
accounting system appear below.
Sales
$360,000
Variable Expenses
$158,000
Fixed Manufacturing Expenses
$119,000
Fixed Selling and Administrative Expenses
$94,000
All fixed expenses of the company are fully
allocated to products in the company's accounting
system. Further investigation has revealed that
$55,000 of the fixed manufacturing expenses and
$71,000 of the fixed selling and administrative
expenses are avoidable if product S85U is
discontinued.
Required:
5. i. According to the company's accounting system,
what is the net operating income earned by
product S85U? Show your work!
ii. What would be the effect on the company's
overall net operating income of dropping product
S85U? Should the product be dropped? Show your
work!
4.
Question :
(TCO D) Fouch Company makes 30,000 units per
year of a part it uses in the products it
manufactures. The unit product cost of this part is
computed as follows.
Direct Materials
$15.70
Direct Labor
$17.50
Variable Manufacturing Overhead
$4.50
Fixed Manufacturing Overhead
$14.60
Unit Product Cost
$52.30
An outside supplier has offered to sell the
company all of these parts it needs for $51.90 a
6. unit. If the company accepts this offer, the facilities
now being used to make the part could be used to
make more units of a product that is in high
demand. The additional contribution margin on
this other product would be $219,000 per year.
If the part were purchased from the outside
supplier, all of the direct labor cost of the part
would be avoided. However, $6.20 of the fixed
manufacturing overhead cost being applied to the
part would continue even if the part were
purchased from the outside supplier. This fixed
manufacturing overhead cost would be applied to
the company's remaining products.
Required:
i. How much of the unit product cost of $52.30 is
relevant in the decision of whether to make or buy
the part?
ii. What is the net total dollar advantage
(disadvantage) of purchasing the part rather than
making it?
iii. What is the maximum amount the company
7. should be willing to pay an outside supplier per
unit for the part if the supplier commits to
supplying all 30,000 units required each year?
5.
Question :
(TCO D) Biello Co. manufactures and sells medals
for winners of athletic and other events. Its
manufacturing plant has the capacity to produce
15,000 medals each month; current monthly
production is 14,250 medals. The company
normally charges $115 per medal. Cost data for the
current level of production are shown below.
Variable Costs
Direct Materials
$969,000
Direct Labor
$270,750
Selling and Administrative
$270,075
Fixed Costs
Manufacturing
$370,550
Selling and Administrative
$89,775
The company has just received a special one-time
order for 600 medals at $102 each. For this
8. particular order, no variable selling and
administrative costs would be incurred. This order
would also have no effect on fixed costs.
Required:
Should the company accept this special order?
Why?
