A company that has a profit can increase its return on investment

(TCO D) A company that has a profit can increase its return on investment by

increasing sales revenue and operating expenses by the same dollar amount.

increasing average operating assets and operating expenses by the same dollar amount.

increasing sales revenue and operating expenses by the same percentage.

decreasing average operating assets and sales by the same percentage.

Question 2. Question : (TCO D) Given the following data, what would ROI be?

Sales $50,000

Net operating income $5,000

Contribution margin $20,000

Average operating assets $25,000

Stockholder’s equity $15,000

10%

20%

16.7%

80%

Question 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?

9.5

10.2

9.8

9.2

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(TCO D) Seebach Corporation has two major business segments—Apparel and Accessories. Data concerning those segments for June appear below.

Sales revenues, Apparel $700,000

Variable expenses, Apparel $406,000

Traceable fixed expenses, Apparel $98,000

Sales revenues, Accessories $710,000

Variable expenses, Accessories $312,000

Traceable fixed expenses, Accessories $107,000

Common fixed expenses totaled $292,000 and were allocated as follows: $155,000 to the Apparel business segment and $137,000 to the Accessories business segment.

Required:

Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

Question 2. Question : (TCO D) Eber Wares is a division of a major corporation. The following data are for the latest year of operations.

Sales $30,000,000

Net Operating income $1,170,000

Average operating assets $8,000,000

The company’s minimum required rate of return 18%

Required:

i. What is the division’s margin?

ii. What is the division’s turnover?

iii. What is the division’s ROI?

iv. What is the division’s residual income?

Question 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:

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!

Question 4. Question : (TCO D) Part F77 is used in one of Wilcutt Corporation’s products. The company’s Accounting Department reports the following costs of producing the 7,000 units of the part that are needed every year.

Per Unit

Direct Materials $7.00

Direct Labor $6.00

Variable Overhead $5.60

Supervisor’s Salary $4.70

Depreciation of Special Equipment $1.50

Allocated General Overhead $5.40

An outside supplier has offered to make the part and sell it to the company for $28.30 each. If this offer is accepted, the supervisor’s salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier’s offer were accepted, only $9,000 of these allocated general overhead costs would be avoided.

Required:

i. Prepare a report that shows the effect on the company’s total net operating income of buying part F77 from the supplier rather than continuing to make it inside the company.

ii. Which alternative should the company choose?

Question 5. Question : (TCO D) A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each. The normal selling price of this product is $48.00 each. The normal unit product cost of product M97 is computed as follows.

Direct Materials $18.50

Direct Labor $1.20

Variable manufacturing overhead $8.40

Fixed manufacturing overhead $3.90

Unit product cost $32.00

Direct labor is a variable cost. The special order would have no effect on the company’s total fixed manufacturing overhead costs. The customer would like some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 in special molds that would have no salvage value. This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order.

Required:

Determine the effect on the company’s total net operating income of accepting the special order. Show your work!