Ac 505 Week 6 Quiz

Topics: Revenue, Net income, Generally Accepted Accounting Principles Pages: 5 (778 words) Published: April 13, 2013
(TCO D) A company that has a profit can increase its return on investment by (Points : 5) 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.

2. (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
(Points : 5)

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) 9.5


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

Sales revenues, Apparel

Variable expenses, Apparel

Traceable fixed expenses, Apparel

Sales revenues, Accessories

Variable expenses, Accessories

Traceable fixed expenses, Accessories

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.


Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts. (Points : 15)

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

Sales $33,040,000
Net Operating Income $1,453,760
Average Operating Assets $8,000,000
The company's minimum required rate of return 18%


i. What is the division's ROI?

ii. What is the division's residual income? (Points : 15)

3. (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.


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! (Points : 15)

4. (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...
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