Acct505 Quiz Essay

727 Words Dec 24th, 2012 3 Pages
PAGE 1:

1. (TCO D) Return on investment (ROI) is equal to the margin multiplied by (Points : 5)

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

Ans: 20% (b)
3. (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? (Points : 5)

Ans: 9.5 (a)
Page 2:
1. (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,
…show more content…
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? (Points : 25)

Ans: 1. Margin: Net Operating Income / Sales = 1,170,000 / 30,000,000 = 3.9%

2. Turnover: Sales / Average Operating Assets = 30,000,000 / 8,000,000 = 3.75 times

3. Return on Investment = Margin x Turnover = 3.9% x 3.75 = 14.625%

4. Residual Income = NOI - (Average Operating Assets * Minimum required rate of return)
= 1,170,000 - (8,000,000 * 18%)
= 1,170,000 - 1,440,000
= ($270,000) = Residual Loss of $270,000.
3. (TCO D) Rosiek Corporation uses part A55 in one of its products. The company's accounting department reports the following costs of producing the 4,000 units of the part that are needed every year.

Per Unit
Direct Materials $2.80
Direct Labor $6.30
Variable Overhead $8.50
Supervisor's Salary $2.60
Depreciation of Special Equipment $6.80
Allocated General Overhead $6.10
1.
An outside supplier has offered to make the part and sell it to the company for $32.30 each. If this offer is

More about Acct505 Quiz Essay

Open Document