Question

1.
Return on investment (ROI) is equal to the margin multipliedby:
A) sales.
B) turnover.
C) average operating assets.
D) residual income.
2.
Delmar Corporation is considering the use of residual income as ameasure of the performance of its divisions. What majordisadvantage of this method should the company consider beforedeciding to institute it?
A) This method does not take into account differences in the sizeof divisions.
B) Investments may be adopted that will decrease the overall returnon investment.
C) The minimum required rate of return may eliminate desirableinvestments.
D) Residual income does not measure how effectively the divisionmanager controls costs.
3.
A company had the following results last year: sales, $700,000;return on investment, 28%; and margin, 8%. The average operatingassets last year were:
A) $200,000
B) $2,450,000
C) $540,000
D) $2,500,000
4.
The Northern Division of the Smith Company had average operatingassets totaling $150,000 last year. If the minimum required rate ofreturn is 12%, and if last year's net operating income at Northernwas $20,000, then the residual income for Northern last yearwas:
A) $20,000
B) $l8,000
C) $5,000
D) $2,000
5.
Kulp Corporation has two major business segments-East and West. InJuly, the East business segment had sales revenues of $900,000,variable expenses of $441,000, and traceable fixed expenses of$171,000. During the same month, the West business segment hadsales revenues of $450,000, variable expenses of $234,000, andtraceable fixed expenses of $45,000. The common fixed expensestotaled $321,000 and were allocated as follows: $180,000 to theEast business segment and $141,000 to the West business segment.The segment margin of the West business segment is:
A) $171,000
B) $675,000
C) $288,000
D) $216,000
6.
Ieso Company has two stores: J and K. During November, Ieso Companyreported a net operating income of $30,000 and sales of $450,000.The contribution margin in Store J was $100,000, or 40% of salesfrom J. The segment margin in Store K was $30,000, or 15% of salesfrom K. Traceable fixed expenses are $60,000 in Store J, and$40,000 in Store K. Sales in Store J totaled:
A) $400,000
B) $250,000
C) $150,000
D) $100,000