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Managerial Accounting

1.) Poxahatche Products provided the following selected information about its consumer products devision for 2007:
Desired ROI=10%
Net Income=$150,000
Residual Income=$50,000
Based on this information, the division's investment amount was:
A.) $700,000 B.) $1,000,000 C.) $4,000,000 D.) $20,000,000

2.) Picard Company reported the following information for 2007:
Sales=$800,000
Average Operating Assets=$300,000
Desired ROI=8%
Net Income=$50,000
The Company's residual income for 2007 was:
A.) $3,200 B.) $24,000 C.) $26,000 D.) $64,000

3.) Prater Company made a $100,000 investment in new machinery. Assuming the company's margin is 4%, what income will be earned if the investment generates $300,000 in additional sales?
A.) $40,000 B.) $12,000 C.) $200,000 D.) None of the Above

4.) Houston Corporation has 2 operating divisions, A and B. The following information is provided for division A:
Unit selling price=$50 Unit Variable Cost=$30 Unit fixed costs=$10
Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $45 to purchase the product from an outside source. If division A sells internally it can save $1 per unit in variable costs. Assuming Division A is operating at capacity, what price should it charge division B if the transfer is made?
A.) $40 B.) $45 C.) $49 D.) $50

5.) When using a residual income (RI) as a project screening tool, management should accept a project if:
A.) RI is negative B.) RI is positive C.) RI is equal to ROI D.) None of the above

6.) Judson Company has an investment in assets of $900,000, an income that is 10% of sales and an ROI of 18%. From this information the amount of income would be:
A.) $162,000 B.) $12,000,000 C.) $5,000,000 D.) $1,620,000

7.) Home Town Grocery has invested in yogurt stands for its stores. The investment cost the company $100,000. Variable materials, preparation, and marketing costs are expected to be $.60 a unit and fixed costs are estimated at $6,000 a year. If actual sales were 20,000 servings, what would the ROI be using the sales price of $1.70?
A.) 16% B.) 22% C.) 28% D.) 34%

8.) Athens Football Corporation desires a 12% ROI on all operations. The following information was available for the company in 2007:
Sales=$14,000 Operating Net income=$2,800 Investment Turnover=.5
What is the corporation's ROI?
A.) 10% B.) 12% C.) 15% D.) 20%

9.) Chatooga Company provided the following selected information about its consumer product division for 2004:
Desired ROI: 8% Net Income=$140,000 Residual Income: $100,000
Based on this information, the division's investment amount was:
A.) $500,000 B.) $1,200,000 C.) $1,240,000 D.) $8,000,000

10.) Johanseen Company reported the following information for 2007:
Sales: $787,000 Avarage Operating Assets: $375,000 Desired ROI: 9%
Residual Income: $11,250
The company's net income for 2007 was:
A.) $37,080 B.) $33,750 C.) $45,000 D.) $363,750

11.) The China's Best Restaurant chain had a 12% return on a $60,000 investment in new ovens. The investment resulted in increased sales and the resultant increase in income amounted to 4% of sales. The increase in sales would have been:
A.) $7,200 B.) $60,000 C.) $180,000 D.) $500,000

12.) The Groovy Movie Chain has invested in Italian snack bars for their stores, where individual pizzas would be prepared and sold. The investment cost the company $45,000. The company expects a sales volume for the new product to be 12,000 pizzas a year. Variable materials, preparation, and marketing costs are expected to be $1.50 a unit and fixed costs are estimated at $15,000 a year. Based on a desired 12% ROI, what should Groovy Movies charge as the selling price per pizza?
A.) $0.45 B.) $2.75 C.) $3.20 D.) $5.20

Solution Preview

1.) Poxahatche Products provided the following selected information about its consumer products devision for 2007:
Desired ROI=10%
Net Income=$150,000
Residual Income=$50,000
Based on this information, the division's investment amount was:
A.) $700,000 B.) $1,000,000 C.) $4,000,000 D.) $20,000,000

Residual Income = Net Income - Investment X desired ROI
50,000=150,000-Investment X 10%
Investment = 100,000/10%=1,000,000

2.) Picard Company reported the following information for 2007:
Sales=$800,000
Average Operating Assets=$300,000
Desired ROI=8%
Net Income=$50,000
The Company's residual income for 2007 was:
A.) $3,200 B.) $24,000 C.) $26,000 D.) $64,000

Residual Income = Net income - Investment X desired ROI
Residual Income = 50,000-300,000X8%
Residual Income = 26,000

3.) Prater Company made a $100,000 investment in new machinery. Assuming the company's margin is 4%, what income will be earned if the investment generates $300,000 in additional sales?
A.) $40,000 B.) $12,000 C.) $200,000 D.) None of the Above

Margin = Income/Sales
Income = Margin X Sales = 4%X300,000=12,000

4.) Houston Corporation has 2 operating divisions, A and B. The following information is provided for division A:
Unit selling price=$50 Unit Variable Cost=$30 Unit fixed costs=$10
Division B uses the type of product ...

Solution Summary

The solution explains various multiple choice questions relating to managerial accounting

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