Question 1

Ieso Company has two stores: J and K. During November, Ieso Company reported a net operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. 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

Accepted Answer

Store J CM ratio = Store J contribution margin ÷ Store J sales
0.40 = $100,000 ÷ Store J sales
Store J sales = $100,000 ÷ 0.40 = $250,000

Question 2

Deskin Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 19%. In February, the Commercial Products Division had average operating assets of $780,000 and net operating income of $139,800. What was the Commercial Products Division's residual income in February?
A) -$8,400
B) -$26,562
C) $8,400
D) $26,562

Accepted Answer

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

Question 3

Denner Company has two divisions, A and B, that reported the following results for October: 
If common fixed expenses were $31,000, total fixed expenses must have been:
A) $31,000
B) $62,000
C) $93,000
D) $52,000

Accepted Answer

Since the common fixed expenses were $31,000, we need to add the fixed expenses of both divisions to get the total fixed expenses. 
Total fixed expenses = Fixed expenses of Division A + Fixed expenses of Division B + Common fixed expenses 
= ($36,000 + $57,000) + ($54,000 + $45,000) + $31,000 
= $183,000 
Therefore, the total fixed expenses are $183,000.

Question 4

The Northern Division of the Smith Company had average operating assets totaling $150,000 last year. If the minimum required rate of return is 12%, and if last year's net operating income at Northern was $20,000, then the residual income for Northern last year was:
A) $20,000
B) $l8,000
C) $5,000
D) $2,000

Accepted Answer

Residual income is calculated as net operating income minus the product of average operating assets and the minimum required rate of return. Here, it is $20,000 - ($150,000 * 12%) = $20,000 - $18,000 = $2,000.

Question 5

Ieso Company has two stores: J and K. During November, Ieso Company reported a net operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses are $60,000 in Store J, and $40,000 in Store K.
-Ieso Company's total fixed expenses for the year were:
A) $40,000
B) $100,000
C) $140,000
D) $170,000

Accepted Answer

Both Store J and Store K have traceable fixed expenses. The traceable fixed expenses for Store J are $60,000 and for Store K is $40,000. Therefore, the total traceable fixed expenses are $100,000.

To calculate the total fixed expenses, we need to use the formula: Total Fixed Expenses = Net Operating Income - Total Contribution Margin - Total Traceable Fixed Expenses

Total Contribution Margin = Contribution Margin in Store J + Segment Margin in Store K
Total Contribution Margin = ($100,000 / 0.4) + ($30,000 / 0.15) 
Total Contribution Margin = $250,000 + $200,000 
Total Contribution Margin = $450,000

Net Operating Income = $30,000

Total Traceable Fixed Expenses = $100,000

Total Fixed Expenses = $30,000 - $450,000 - $100,000 
Total Fixed Expenses = ($520,000)

Therefore, the best choice is C, $140,000.

Question 6

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 ROI of 15%?
A) 2.00%
B) 15.00%
C) 9.99%
D) 7.50%

Accepted Answer

Turnover = Sales ÷ Average operating assets
= $750,000 ÷ $375,000 = 2
ROI = Margin × Turnover
15% = Margin × 2
Margin = 15% ÷ 2 = 7.5%

Question 7

Verkamp Corporation has two divisions: the YDI Division and the QCC Division. The corporation's net operating income is $31,800. The YDI Division's divisional segment margin is $111,800 and the QCC Division's divisional segment margin is $152,800. What is the amount of the common fixed expense not traceable to the individual divisions?
A) $143,600
B) $184,600
C) $264,600
D) $232,800

Accepted Answer

To find the amount of the common fixed expense not traceable to the individual divisions, we need to use the formula: Net Operating Income = YDI Division Segment Margin + QCC Division Segment Margin + Common Fixed Expense Not Traceable.

Substituting the given values, we get:

$31,800 = $111,800 + $152,800 + Common Fixed Expense Not Traceable
Common Fixed Expense Not Traceable = $31,800 - $111,800 - $152,800
Common Fixed Expense Not Traceable = $232,800

Therefore, the common fixed expense not traceable to the individual divisions is $232,800. The answer is D.

Question 8

In January, the Universal Solutions Division of Zima Corporation had average operating assets of $520,000 and net operating income of $97,600. The company uses residual income, with a minimum required rate of return of 18%, to evaluate the performance of its divisions. What was the Universal Solutions Division's residual income in January?
A) $4,000
B) ($4,000)
C) $17,568
D) ($17,568)

Accepted Answer

Residual income is calculated as net operating income minus the product of average operating assets and the minimum required rate of return. Here, it is $97,600 - ($520,000 * 0.18) = $97,600 - $93,600 = $4,000.

Question 9

A company's average operating assets are $220,000 and its net operating income is $44,000. The company invested in a new project, increasing average assets to $250,000 and increasing its net operating income to $49,550. What is the project's residual income if the required rate of return is 20%?
A) ($450)
B) $450
C) $600
D) ($600)

Accepted Answer

Residual income = Net operating income - (Required rate of return * Average operating assets)= $49,550 - (0.20 * $250,000)= $49,550 - $50,000= -$450

Question 10

Kaighn Corporation has two divisions: the West Division and the East Division. The corporation's net operating income is $18,500. The West Division's divisional segment margin is $27,700 and the East Division's divisional segment margin is $49,400. What is the amount of the common fixed expense not traceable to the individual divisions?
A) $46,200
B) $67,900
C) $77,100
D) $58,600

Accepted Answer

The answer of Kaighn Corporation has two divisions: the West...

Question 11

Given the following data: 
Return on investment (ROI) would be:
A) 10%
B) 20%
C) 16.7%
D) 80%

Accepted Answer

The answer of Given the following data: 
Return on investment...

Question 12

Anspach Corporation has two divisions: the Governmental Products Division and the Consumer Products Division. The Governmental Products Division's divisional segment margin is $11,800 and the Consumer Products Division's divisional segment margin is $155,500. The total amount of common fixed expenses not traceable to the individual divisions is $142,200. What is the company's net operating income?
A) ($167,300)
B) $25,100
C) $309,500
D) $167,300

Accepted Answer

The company's net operating income is calculated by adding the divisional segment margins and then subtracting the common fixed expenses: $11,800 + $155,500 - $142,200 = $25,100.

Question 13

Campion Company has two divisions, A and B. The following data pertain to operations in May:

If common fixed expenses were $10,000, total fixed expenses were:
A) $10,000
B) $30,500
C) $40,500
D) $65,500

Accepted Answer

Total fixed expenses can be calculated by adding the fixed expenses for both divisions. Fixed expenses for Division A are $20,000 and for Division B are $30,500, which adds up to $50,500. Since $10,000 is common to both divisions, it should not be counted twice. Therefore, the total fixed expenses are $40,500 (=$50,500-$10,000).

Question 14

Reardon Retail Company consists of two stores, A and B. Store A had sales of $80,000 during March, a contribution margin ratio of 30%, and a segment margin of $11,000. The company as a whole had sales of $200,000, a contribution margin ratio of 36%, and segment margins for the two stores totaling $31,000. If net operating income for the company was $15,000 for the month, the traceable fixed expenses in Store B must have been:
A) $16,000
B) $20,000
C) $31,000
D) $28,000

Accepted Answer

First, we can calculate the contribution margin for the whole company using the given information:

Contribution margin = (Total sales * Contribution margin ratio) - Traceable fixed expenses

$200,000 * 0.36 - Traceable fixed expenses = $31,000

Traceable fixed expenses = $28,000

Next, we can use the segment margin formula to find Store B's segment margin:

Segment margin = (Store sales * Contribution margin ratio) - Store traceable fixed expenses

Store B's segment margin + $11,000 (from Store A) = $31,000

Store B's segment margin = $20,000

Finally, we can use the segment margin formula again to find Store B's traceable fixed expenses:

$80,000 * 0.3 - Store B's traceable fixed expenses = $20,000

Store B's traceable fixed expenses = $16,000

Therefore, the answer is D.

Question 15

Ieso Company has two stores: J and K. During November, Ieso Company reported a net operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses are $60,000 in Store J, and $40,000 in Store K.
-The segment margin ratio in Store J was:
A) 16%
B) 24%
C) 40%
D) 60%

Accepted Answer

The segment margin ratio is calculated by dividing the segment margin by the sales. In Store J, the segment margin is $30,000 and the sales are $100,000. Therefore, the segment margin ratio in Store J is $30,000/$100,000 = 30%.

Question 16

A company had the following results last year: sales, $700,000; return on investment, 28%; and margin, 8%. The average operating assets last year were:
A) $200,000
B) $2,450,000
C) $540,000
D) $2,500,000

Accepted Answer

The answer of A company had the following results last...

Question 17

Ieso Company has two stores: J and K. During November, Ieso Company reported a net operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses are $60,000 in Store J, and $40,000 in Store K.
-Variable expenses in Store K totaled:
A) $70,000
B) $110,000
C) $200,000
D) $130,000

Accepted Answer

11ea7761_1835_23cb_81a5_e3b8945b80e9_TB2580_00 Store K segment margin = Store K contribution margin - Store K traceable fixed expenses
$30,000 = Store K contribution margin - $40,000
Store K contribution margin = $30,000 + $40,000 = $70,000
Store K segment ratio = Store K segment margin ÷ Store K sales
0.15 = $30,000 ÷ Store K sales
Store K sales = $30,000 ÷ 0.15 = $200,000
 11ea7761_1835_4adc_81a5_cdd75bc7a291_TB2580_00 Store K contribution margin = Store K sales - Store K variable expenses
$70,000 = $200,000 - Store K variable expenses
Store K variable expenses = $200,000 - $70,000 = $130,000

Question 18

Howe Company increased its ROI from 20% to 25%. Net operating income and sales remained at their previous levels of $40,000 and $1,000,000 respectively. The increase in ROI was attributed to a reduction in operating assets brought about by the sale of obsolete inventory at cost (the proceeds from the sale were used to reduce bank loans). By how much was inventory reduced?
A) $8,000
B) $40,000
C) $10,000
D) it is impossible to determine from the data given.

Accepted Answer

The answer of Howe Company increased its ROI from 20%...

Question 19

Bonniwell Corporation has two divisions: the Delta Division and the Alpha Division. The Delta Division has sales of $620,000, variable expenses of $359,600, and traceable fixed expenses of $229,200. The Alpha Division has sales of $820,000, variable expenses of $541,200, and traceable fixed expenses of $172,900. The total amount of common fixed expenses not traceable to the individual divisions is $122,000. What is the company's net operating income?
A) $539,200
B) $15,100
C) $137,100
D) $417,200

Accepted Answer

The net operating income is calculated by subtracting total expenses from total sales. For Delta: $620,000 - $359,600 - $229,200 = $31,200. For Alpha: $820,000 - $541,200 - $172,900 = $105,900. Combined divisional income: $31,200 + $105,900 = $137,100. Subtract common fixed expenses: $137,100 - $122,000 = $15,100.

Question 20

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?
A) 9.5
B) 10.2
C) 9.8
D) 9.2

Accepted Answer

The company's turnover is calculated as Sales divided by Average Operating Assets. Average Operating Assets = ($84,000 + $90,000) / 2 = $87,000. Turnover = $826,650 / $87,000 = 9.5.

Quiz 12: Segment Reporting, Decentralization, and the Balanced Scorecard

Denner Company has two divisions, A and B, that reported the following results for October: If common fixed expenses were $31,000, total fixed expenses must have been:

The Northern Division of the Smith Company had average operating assets totaling $150,000 last year. If the minimum required rate of return is 12%, and if last year's net operating income at Northern was $20,000, then the residual income for Northern last year was:

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 ROI of 15%?

A company's average operating assets are $220,000 and its net operating income is $44,000. The company invested in a new project, increasing average assets to $250,000 and increasing its net operating income to $49,550. What is the project's residual income if the required rate of return is 20%?

Given the following data: Return on investment (ROI) would be:

Campion Company has two divisions, A and B. The following data pertain to operations in May: If common fixed expenses were $10,000, total fixed expenses were:

A company had the following results last year: sales, $700,000; return on investment, 28%; and margin, 8%. The average operating assets last year were:

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?