ACC 211 Unit 7 Homework Questions 2015

1. Aide Industries is a division of a major corporation. Data concerning the most recent yearappears below:The division’s margin is closest to:21.8%5.0%23.0%28.0%1. Chace Products is a division of a major corporation. Last year the division had total salesof $21,300,000, net operating income of $575,100, and average operating assets of$5,000,000. The company’s minimum required rate of return is 12%.The division’s margin is closest to:26.2%23.5%2.7%11.5%1. Chace Products is a division of a major corporation. Last year the division had total salesof $21,300,000, net operating income of $575,100, and average operating assets of$5,000,000. The company’s minimum required rate of return is 12%.The division’s return on investment (ROI) is closest to:49.0%11.5%0.3%2.2%1. The West Division of Shekarchi Corporation had average operating assets of $620,000and net operating income of $80,100 in March. The minimum required rate of return forperformance evaluation purposes is 14%.What was the West Division’s minimum required return in March?$80,100$86,800$11,214$98,0141. Chace Products is a division of a major corporation. Last year the division had total salesof $21,300,000, net operating income of $575,100, and average operating assets of$5,000,000. The company’s minimum required rate of return is 12%.The division’s turnover is closest to:3.824.260.1237.041. Chace Products is a division of a major corporation. Last year the division had total salesof $21,300,000, net operating income of $575,100, and average operating assets of$5,000,000. The company’s minimum required rate of return is 12%.The division’s residual income is closest to:$575,100$1,175,100$(1,980,900)$(24,900)1. Two alternatives, code-named X and Y, are under consideration at Afalava Corporation.Costs associated with the alternatives are listed below.Are the materials costs and processing costs relevant in the choice between alternatives Xand Y? (Ignore the equipment rental and occupancy costs in this question.)Only materials costs are relevantOnly processing costs are relevantBoth materials costs and processing costs are relevantNeither materials costs nor processing costs are relevant1. Ahsan Company makes 60,000 units per year of a part it uses in the products itmanufactures. The unit product cost of this part is computed as follows:An outside supplier has offered to sell the company all of these parts it needs for $45.70 aunit. If the company accepts this offer, the facilities now being used to make the partcould be used to make more units of a product that is in high demand. The additionalcontribution margin on this other product would be $318,000 per year.If the part were purchased from the outside supplier, all of the direct labor cost of the partwould be avoided. However, $3.50 of the fixed manufacturing overhead cost beingapplied to the part would continue even if the part were purchased from the outsidesupplier. This fixed manufacturing overhead cost would be applied to the company’sremaining products.How much of the unit product cost of $40.50 is relevant in the decision of whether tomake or buy the part?$40.50$15.20$27.90$37.001. The Tingey Company has 500 obsolete microcomputers that are carried in inventory at atotal cost of $720,000. If these microcomputers are upgraded at a total cost of $100,000,they can be sold for a total of $160,000. As an alternative, the microcomputers can besold in their present condition for $50,000.Suppose the selling price of the upgraded computers has not been set. At what sellingprice per unit would the company be as well off upgrading the computers as if it just soldthe computers in their present condition?$100$770$300$2101. The Tingey Company has 500 obsolete microcomputers that are carried in inventory at atotal cost of $720,000. If these microcomputers are upgraded at a total cost of $100,000,they can be sold for a total of $160,000. As an alternative, the microcomputers can besold in their present condition for $50,000.What is the net advantage or disadvantage to the company from upgrading the computersrather than selling them in their present condition?$110,000 advantage$660,000 disadvantage$10,000 advantage$60,000 advantage1. Peluso Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity.Peluso’s plant manager is considering making the headlights now being purchased froman outside supplier for $11 each. The Peluso plant has idle equipment that could be usedto manufacture the headlights. The design engineer estimates that each headlight requires$4 of direct materials, $3 of direct labor, and $6.00 of manufacturing overhead. Fortypercent of the manufacturing overhead is a fixed cost that would be unaffected by thisdecision. A decision by Peluso Company to manufacture the headlights should result in anet gain (loss) for each headlight of:$(2.00)$1.60$0.40$2.801. Part S00 is used in one of Morsey Corporation’s products. The company makes 6,000units of this part each year. The company’s Accounting Department reports the followingcosts of producing the part at this level of activity:Per UnitDirect materials$1.40Direct labor$2.40Variable manufacturing overhead$7.20Supervisor’s salary$3.60Depreciation of special equipment$8.90Allocated general overhead$4.502. An outside supplier has offered to produce this part and sell it to the company for $16.10each. 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 waspurchased many years ago and has no salvage value or other use. The allocated generaloverhead represents fixed costs of the entire company. If the outside supplier’s offer wereaccepted, only $6,000 of these allocated general overhead costs would be avoided.If management decides to buy part S00 from the outside supplier rather than to continuemaking the part, what would be the annual impact on the company’s overall net operatingincome?Net operating income would decrease by $3,000 per year.Net operating income would decrease by $71,400 per year.Net operating income would decrease by $77,400 per year.Net operating income would decrease by $65,400 per year.1. Two alternatives, code-named X and Y, are under consideration at Afalava Corporation.Costs associated with the alternatives are listed below.What is the differential cost of Alternative Y over Alternative X, including all of therelevant costs?$103,000$39,000$142,000$122,5001. Lusk Company produces and sells 15,000 units of Product A each month. The sellingprice of Product A is $20 per unit, and variable expenses are $14 per unit. A study hasbeen made concerning whether Product A should be discontinued. The study shows that$70,000 of the $100,000 in fixed expenses charged to Product A would continue even ifthe product was discontinued. These data indicate that if Product A is discontinued, thecompany’s overall net operating income would:decrease by $60,000 per monthincrease by $10,000 per monthincrease by $20,000 per monthdecrease by $20,000 per month1. The management of Freshwater Corporation is considering dropping product C11B. Datafrom the company’s accounting system appear below:All fixed expenses of the company are fully allocated to products in the company’saccounting system. Further investigation has revealed that $211,000 of the fixedmanufacturing expenses and $122,000 of the fixed selling and administrative expensesare avoidable if product C11B is discontinued.According to the company’s accounting system, what is the net operating income earnedby product C11B?$74,000$(521,000)$(74,000)$521,000