ACCOUNTING-Aide Industries is a division of a major corporation.

Aide Industries is a division of a major corporation.
Data concerning the most recent year appears below:
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The
division’s margin is closest to:

21.8%

5.0%

23.0%

28.0%

Chace Products is a division of a major corporation.
Last year the division had total sales of $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%

Chace Products is a division of a major corporation.
Last year the division had total sales of $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%

The West Division of Shekarchi Corporation had average
operating assets of $620,000 and net operating income of $80,100 in March.
The minimum required rate of return for performance evaluation purposes is
14%.

What was the West Division’s minimum required return in March?

$80,100

$86,800

$11,214

$98,014

Chace Products is a division of a major corporation.
Last year the division had total sales of $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:

3.82

4.26

0.12

37.04

Chace Products is a division of a major corporation.
Last year the division had total sales of $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)

Two alternatives, code-named X and Y, are under
consideration at Afalava Corporation. Costs associated with the
alternatives are listed below.

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Are the materials costs and processing costs relevant in the choice
between alternatives X and Y? (Ignore the equipment rental and occupancy
costs in this question.)

Only materials costs are relevant

Only processing costs are relevant

Both materials costs and
processing costs are relevant

Neither materials costs nor
processing costs are relevant

Ahsan Company makes 60,000 units per year of a part it
uses in the products it manufactures. The unit product cost of this part
is computed as follows:

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An outside supplier has offered to sell the company all of these parts it
needs for $45.70 a 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 $318,000 per year.
If the part were purchased from the outside supplier, all of the direct
labor cost of the part would be avoided. However, $3.50 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.

How much of the unit product cost of $40.50 is relevant in the decision of
whether to make or buy the part?

$40.50

$15.20

$27.90

$37.00

The Tingey Company has 500 obsolete microcomputers that
are carried in inventory at a total 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 be sold
in their present condition for $50,000.

Suppose the selling price of the upgraded computers has not been set. At
what selling price per unit would the company be as well off upgrading the
computers as if it just sold the computers in their present condition?

$100

$770

$300

$210

The Tingey Company has 500 obsolete microcomputers that
are carried in inventory at a total 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 be sold
in their present condition for $50,000.

What is the net advantage or disadvantage to the company from upgrading
the computers rather than selling them in their present condition?

$110,000 advantage

$660,000 disadvantage

$10,000 advantage

$60,000 advantage

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 from an outside supplier for $11
each. The Peluso plant has idle equipment that could be used to
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. Forty percent of the manufacturing overhead is
a fixed cost that would be unaffected by this decision. A decision by
Peluso Company to manufacture the headlights should result in a net gain
(loss) for each headlight of:

$(2.00)

$1.60

$0.40

$2.80

Part S00 is used in one of
Morsey Corporation’s products. The company makes 6,000 units of this part
each year. The company’s Accounting Department reports the following costs
of producing the part at this level of activity:

Per Unit

Direct materials

$1.40

Direct labor

$2.40

Variable manufacturing overhead

$7.20

Supervisor’s salary

$3.60

Depreciation of special equipment

$8.90

Allocated general overhead

$4.50

An outside supplier has offered
to produce this part and sell it to the company for $16.10 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 $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
continue making the part, what would be the annual impact on the company’s
overall net operating income?

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.

Two alternatives, code-named X and Y, are under
consideration at Afalava Corporation. Costs associated with the
alternatives are listed below.

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What is the differential cost of Alternative Y over Alternative X,
including all of the relevant costs?

$103,000

$39,000

$142,000

$122,500

Lusk Company produces and sells 15,000 units of Product
A each month. The selling price of Product A is $20 per unit, and variable
expenses are $14 per unit. A study has been 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 if the
product was discontinued. These data indicate that if Product A is
discontinued, the company’s overall net operating income would:

decrease by $60,000 per month

increase by $10,000 per month

increase by $20,000 per month

decrease by $20,000 per month

The management of Freshwater Corporation is considering
dropping product C11B. Data from the company’s accounting system appear
below:

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All fixed expenses of the company are fully allocated to products in the company’s
accounting system. Further investigation has revealed that $211,000 of the
fixed manufacturing expenses and $122,000 of the fixed selling and
administrative expenses are avoidable if product C11B is discontinued.

According to the company’s accounting system, what is the net operating
income earned by product C11B?

$74,000

$(521,000)

$(74,000)

$521,000

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