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Exam 11: Responsibility Accounting Systems

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Question 31

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Cabell Products is a division of a major corporation. Last year the division had total sales of $26,320,000, net operating income of $2,424,320, and average operating assets of $7,000,000. The company's minimum required rate of return is 12%.The division's turnover is closest to:

A) 10.86
B) 3.76
C) 0.35
D) 2.89

E) None of the above
F) All of the above

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Question 32

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Mangiamele Corporation's Maintenance Department provides services to the company's two operating divisions-the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period. Data appear below: For performance evaluation purposes, how much Maintenance Department cost should be charged to the Paints Division at the end of the year?

A) $234,000
B) $500,500
C) $279,900
D) $300,300

E) A) and B)
F) All of the above

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Question 33

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The West Division of Cecchetti Corporation had average operating assets of $240,000 and net operating income of $42,200 in August. The minimum required rate of return for performance evaluation purposes is 19%.What was the West Division's minimum required return in August?

Fois Company has two divisions, Division X and Division Y. Division X has a production capacity of 5,000 units of a particular part per month. Division X sells 4,400 units of the part each month to outside customers at a contribution margin of $56 per unit. Division Y would like to buy 800 units of the part each month from Division X. In computing the lowest acceptable transfer price from the perspective of the selling division, the lost contribution margin per unit portion of the transfer price computation would be:

Vandermeer Products, Incorporated, has a Antennae Division that manufactures and sells a number of products, including a standard antennae. Data concerning that antennae appear below: The company has a Aircraft Products Division that could use this antennae in one of its products. The Aircraft Products Division is currently purchasing 11,000 of these antennaes per year from an overseas supplier at a cost of $88 per antennae. Required: a. Assume that the Antennae Division is selling all of the antennaes it can produce to outside customers. What is the acceptable range, if any, for the transfer price between the two divisions?b. Assume again that the Antennae Division is selling all of the antennaes it can produce to outside customers. Also assume that $1 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions?

The following data pertain to Turk Company's operations last year: Turk's return on investment for the year was:

Weafer Incorporated reported the following results from last year's operations: Last year's margin was closest to:

Which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment (ROI) computations?

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:

Wetherald Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: The Pool Products Division is currently purchasing 4,000 of these pumps per year from an overseas supplier at a cost of $74 per pump.Assume that the Pump Division is selling all of the pumps it can produce to outside customers. What should be the minimum acceptable transfer price for the pumps from the standpoint of the Pump Division?

Cabell Products is a division of a major corporation. Last year the division had total sales of $25,540,000, net operating income of $1,277,000, and average operating assets of $7,151,200. The company's minimum required rate of return is 16%.The division's return on investment (ROI) is closest to:

Brodrick Corporation uses residual income to evaluate the performance of its divisions. The minimum required rate of return for performance evaluation purposes is 19%. The Games Division had average operating assets of $140,000 and net operating income of $25,900 in August.Required:What was the Games Division's residual income in August?

Edith Carolina is president of the Deed Corporation. The company is decentralized, and leaves investment decisions up to the discretion of the division managers. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past three years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%. The company's minimum required rate of return is 8%.If the Deed Corporation evaluates managerial performance using residual income based on the corporate minimum required rate of return of 8%, what decision would be preferred by Edith Carolina and Michael Sanders?

The Millard Division's operating data for the past two years are provided below: Millard Division's margin in Year 2 was 120% of the margin in Year 1.The net operating income for Year 1 was:

Rohrer Products, Incorporated has a Motor Division that manufactures and sells a number of products, including a standard motor that could be used by another division in the company, the Automotive Division, in one of its products. Data concerning that motor appear below: The Automotive Division is currently purchasing 10,000 of these motors per year from an overseas supplier at a cost of $88 per motor. Assume that the Motor Division has enough idle capacity to handle all of the Automotive Division's needs. What should be the minimum acceptable transfer price for the motors from the standpoint of the Motor Division?

The following data pertains to Timmins Company's operations last year: Required: a. Compute the company's average operating assets. b. Compute the company's residual income for the year.

Which of the following performance measures will increase if inventory decreases and all else remains the same?

Oaks Company maintains a cafeteria for its employees. For June, variable food costs were budgeted at $48 per employee based on a budgeted level of 1,000 employees in other departments. During the month, an average of 1,100 employees worked in other departments. The cafeteria's total food costs for the month came to $57,750. How much food cost should be charged to the other departments at the end of the month for performance evaluation purposes?

Which of the following companies is following a policy with respect to the costs of service departments that is not recommended?

Worley Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $1,000,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 17%. Required: 1. What was last year's residual income? 2. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall residual income this year? 3. If Westerville's chief executive officer earns a bonus only if residual income for this year exceeds residual income for last year, would the chief executive officer pursue the investment opportunity?