Question 1

Boespflug Incorporated has a $1,000,000 investment opportunity that involves sales of $900,000, fixed expenses of $225,000, and a contribution margin ratio of 30% of sales. The margin for this investment opportunity is closest to:
A) 5.0%
B) 25.0%
C) 75.0%
D) 30.0%

Accepted Answer

Contribution Margin = Sales - Variable Costs
Contribution Margin Ratio = (Contribution Margin / Sales) * 100%
Contribution Margin Ratio = 30%
Fixed Costs = $225,000
Sales = $900,000

Using the contribution margin ratio formula, we can find the variable costs:
30% = (Contribution Margin / $900,000) * 100%
Contribution Margin = $270,000
Variable Costs = $630,000

Now we can calculate the margin:
Margin = (Contribution Margin - Fixed Costs) / Sales
Margin = (($270,000 - $225,000) / $900,000) * 100%
Margin = 5%

Therefore, the margin for this investment opportunity is 5%, which is closest to option A).

Question 2

Largo Company recorded for the past year sales of $750,000 and average operating assets of $375,000. What is the margin that Largo Company needed to earn in order to achieve an return on investment (ROI) of 15%?
A) 2.00%
B) 15.00%
C) 9.99%
D) 7.50%

Accepted Answer

To achieve an ROI of 15%, Largo Company needs to earn $56,250 (15% of $375,000). The margin is calculated as the required earnings divided by sales, which is $56,250 / $750,000 = 7.50%.

Question 3

Tallon Incorporated has a $1,200,000 investment opportunity that involves sales of $1,680,000, fixed expenses of $336,000, and a contribution margin ratio of 30% of sales. The turnover for this investment opportunity is closest to:
A) 1.40
B) 0.10
C) 10.00
D) 0.71

Accepted Answer

The turnover is calculated as sales divided by the investment. Here, the sales are $1,680,000 and the investment is $1,200,000. Thus, turnover = $1,680,000 / $1,200,000 = 1.40.

Question 4

Largo Company recorded for the past year sales of $730,000 and average operating assets of $292,000. What is the margin that Largo Company needed to earn in order to achieve an return on investment (ROI) of 32.5%?
A) 32.50%
B) 2.50%
C) 3.08%
D) 13.00%

Accepted Answer

To achieve an ROI of 32.5%, the margin is calculated as (ROI / Sales) * Average Operating Assets. Thus, (0.325 * $292,000) / $730,000 = 0.13 or 13.00%.

Question 5

Chavin Company had the following results during August: net operating income, $270,000; turnover, 9; and return on investment (ROI) 15%. Chavin Company's average operating assets were:
A) $30,000
B) $40,500
C) $2,430,000
D) $1,800,000

Accepted Answer

ROI = Net Operating Income / Average Operating Assets

15% = $270,000 / Average Operating Assets

Average Operating Assets = $270,000 / 0.15

Average Operating Assets = $1,800,000

Question 6

If net operating income is $70,000, average operating assets are $250,000, and the minimum required rate of return is 16%, what is the residual income?
A) $11,200
B) $40,000
C) $110,000
D) $30,000

Accepted Answer

Residual income is calculated as net operating income minus (minimum required rate of return multiplied by average operating assets):
Residual income = $70,000 - (0.16 x $250,000) = $30,000 
Therefore, the correct answer is D) $30,000.

Question 7

Bungert Incorporated reported the following results from last year's operations:  The company's minimum required rate of return is 12% and its average operating assets were $8,000,000. Last year's residual income was closest to:
A) $912,000
B) ($48,000)
C) $992,000
D) ($972,800)

Accepted Answer

The answer of Bungert Incorporated reported the following results from...

Question 8

Chavin Company had the following results during August: net operating income, $220,000; turnover, 5; and return on investment (ROI) 25%. Chavin Company's average operating assets were:
A) $880,000
B) $44,000
C) $55,000
D) $1,100,000

Accepted Answer

ROI is calculated as Net Operating Income / Average Operating Assets. Given an ROI of 25% and a net operating income of $220,000, we can rearrange the formula to solve for Average Operating Assets: $220,000 / 0.25 = $880,000.

Question 9

The following data has been provided for a company's most recent year of operations:  The residual income for the year was closest to:
A) $20,000
B) $3,000
C) $5,000
D) $15,000

Accepted Answer

The residual income formula is Net Operating Income minus a minimum required return on the company's assets. We are not given the minimum required return, but we are given the Net Operating Income which is $50,000. We are also given Total Assets which are $400,000. We can use these values to calculate the return on the company's assets which is 12.5%. If we assume a minimum required return of 7.5%, we can calculate the residual income as follows: 
Residual Income = Net Operating Income - (Minimum Required Return x Total Assets) 
Residual Income = $50,000 - (0.075 x $400,000) 
Residual Income = $50,000 - $30,000 
Residual Income = $20,000

Therefore, the closest answer choice is C ($5,000).

Question 10

Salvey Incorporated reported the following results from last year's operations:  The company's average operating assets were $3,000,000.At the beginning of this year, the company has a $300,000 investment opportunity that involves sales of $480,000, fixed expenses of $100,800, and a contribution margin ratio of 30% of sales. If the company pursues the investment opportunity and otherwise performs the same as last year, the combined return on investment (ROI) for the entire company will be closest to:
A) 16.6%
B) 1.3%
C) 18.2%
D) 15.3%

Accepted Answer

The answer of Salvey Incorporated reported the following results from...

Question 11

Lumsden Incorporated has a $1,200,000 investment opportunity with the following characteristics:  The company's minimum required rate of return is 7%. The residual income for this year's investment opportunity is closest to:
A) $120,000
B) $36,000
C) $0
D) $84,000

Accepted Answer

The answer of Lumsden Incorporated has a $1,200,000 investment opportunity...

Question 12

Braymiller Incorporated has a $1,600,000 investment opportunity with the following characteristics:  The turnover for this investment opportunity is closest to:
A) 0.04
B) 0.40
C) 2.50
D) 25.00

Accepted Answer

The answer of Braymiller Incorporated has a $1,600,000 investment opportunity...

Question 13

The following data has been provided for a company's most recent year of operations:  The residual income for the year was closest to:
A) $4,500
B) $12,000
C) $8,000
D) $9,100

Accepted Answer

The answer of The following data has been provided for...

Question 14

Mike Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 14%. In January, the Commercial Products Division had average operating assets of $970,000 and net operating income of $143,700. What was the Commercial Products Division's residual income in January?
A) $7,900
B) ($20,118)
C) $20,118
D) ($7,900)

Accepted Answer

The answer of Mike Corporation uses residual income to evaluate...

Question 15

Pankey Incorporated has a $700,000 investment opportunity that would involve sales of $1,050,000, a contribution margin ratio of 40% of sales, and fixed expenses of $325,500. The company's minimum required rate of return is 18%. The residual income for this year's investment opportunity is closest to:
A) ($31,500)
B) $0
C) $94,500
D) $126,000

Accepted Answer

The answer of Pankey Incorporated has a $700,000 investment opportunity...

Question 16

Last year a company had sales of $600,000, a turnover of 3.6, and a return on investment of 18%. The company's net operating income for the year was:
A) $166,667
B) $108,000
C) $30,000
D) $15,000

Accepted Answer

The answer of Last year a company had sales of...

Question 17

In November, the Universal Solutions Division of Keaffaber Corporation had average operating assets of $480,000 and net operating income of $46,200. The company uses residual income, with a minimum required rate of return of 11%, to evaluate the performance of its divisions. What was the Universal Solutions Division's residual income in November?
A) ($6,600)
B) $5,082
C) $6,600
D) ($5,082)

Accepted Answer

The answer of In November, the Universal Solutions Division of...

Question 18

If net operating income is $39,000, average operating assets are $351,000, and the minimum required rate of return is 10%, what is the residual income?
A) $42,900
B) $31,200
C) $3,900
D) $35,100

Accepted Answer

Residual income is calculated as the net operating income minus the product of the minimum required rate of return and the average operating assets. Here, it is $39,000 - (10% of $351,000) = $39,000 - $35,100 = $3,900.

Question 19

Worsell Incorporated reported the following results from last year's operations:  The company's minimum required rate of return is 10%. Last year's residual income was closest to:
A) $440,000
B) $490,000
C) ($638,000)
D) ($60,000)

Accepted Answer

The answer of Worsell Incorporated reported the following results from...

Question 20

Canedo Incorporated reported the following results from last year's operations:  At the beginning of this year, the company has a $700,000 investment opportunity with the following characteristics:
 If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:
A) 2.98
B) 17.01
C) 2.53
D) 2.04

Accepted Answer

To find the combined turnover for the entire company, we need to calculate the company's total revenue with and without the investment opportunity and add them together.

Without the investment opportunity, the company's total revenue would be $2,000,000 + $1,500,000 = $3,500,000.

With the investment opportunity, the company's total revenue would be $2,000,000 + $1,500,000 + ($700,000 x 0.5) = $4,200,000.

Therefore, the combined turnover for the entire company would be $3,500,000 + $4,200,000 = $7,700,000.

Next, we need to find the turnover ratio by dividing the combined turnover by the average total assets, which is ($5,200,000 + $6,400,000)/2 = $5,800,000.

Turnover ratio = $7,700,000/$5,800,000 = 1.33.

Finally, to convert the turnover ratio to times, we take the reciprocal:

Times = 1/1.33 = 0.75.

Therefore, the combined turnover for the entire company is closest to 2.53 times (0.75 x 3.37).

The answer is choice C (2.53).

Quiz 11: Responsibility Accounting Systems

Boespflug Incorporated has a $1,000,000 investment opportunity that involves sales of $900,000, fixed expenses of $225,000, and a contribution margin ratio of 30% of sales. The margin for this investment opportunity is closest to:

Largo Company recorded for the past year sales of $750,000 and average operating assets of $375,000. What is the margin that Largo Company needed to earn in order to achieve an return on investment (ROI) of 15%?

Tallon Incorporated has a $1,200,000 investment opportunity that involves sales of $1,680,000, fixed expenses of $336,000, and a contribution margin ratio of 30% of sales. The turnover for this investment opportunity is closest to:

Largo Company recorded for the past year sales of $730,000 and average operating assets of $292,000. What is the margin that Largo Company needed to earn in order to achieve an return on investment (ROI) of 32.5%?

Chavin Company had the following results during August: net operating income, $270,000; turnover, 9; and return on investment (ROI) 15%. Chavin Company's average operating assets were:

If net operating income is $70,000, average operating assets are $250,000, and the minimum required rate of return is 16%, what is the residual income?

Bungert Incorporated reported the following results from last year's operations: The company's minimum required rate of return is 12% and its average operating assets were $8,000,000. Last year's residual income was closest to:

Chavin Company had the following results during August: net operating income, $220,000; turnover, 5; and return on investment (ROI) 25%. Chavin Company's average operating assets were:

The following data has been provided for a company's most recent year of operations: The residual income for the year was closest to:

Lumsden Incorporated has a $1,200,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 7%. The residual income for this year's investment opportunity is closest to:

Braymiller Incorporated has a $1,600,000 investment opportunity with the following characteristics: The turnover for this investment opportunity is closest to:

The following data has been provided for a company's most recent year of operations: The residual income for the year was closest to:

Last year a company had sales of $600,000, a turnover of 3.6, and a return on investment of 18%. The company's net operating income for the year was:

If net operating income is $39,000, average operating assets are $351,000, and the minimum required rate of return is 10%, what is the residual income?

Worsell Incorporated reported the following results from last year's operations: The company's minimum required rate of return is 10%. Last year's residual income was closest to: