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    Return on investment

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    1. Gibson Company has tow production departments, Mixing and Finishing, served by a maintenance department. Bugeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data is as follows:

    Mixing Finishing
    Long-run capacity 18,000 12,000
    availability*
    Budgeted* 12,000 10,500
    Actual* 15,000 9,000

    * in labor hours

    Actual maintenance department costs were $36,000 fixed and $10,000 variable. The amount fo variable maintenance costs allocated to the Mixing Department should be ______________.

    A. $ 62,5000
    B. $72,000
    C. $48,000
    D. $60,000

    The answer is B

    2. Hammacher, Inc. has two departments, Get and Go. Relevant information is presented below:

    Get Budgeted Sales $400,000 $2,000,000
    Actual Sales $300,000 $2,100,000
    Total advertising expense is $300,000

    If the allocation base is changed from the budgeted sales to actual sales, the amount allocated to the Get Department will __________.

    Decrease by $25,000
    Decrease by $12,500
    Increase by $12,500
    Increase by $25,000

    The answer is Decrease by $25,000

    3. The following information is availale for the Super View Company:

    Sales $250,000
    Invested Capital $156,250
    ROI 10%

    What is the return of the sales?

    10.00 percent
    6.25 percent
    1.0 percent
    none of the listed

    The answer is none of the listed

    4. To create a management control system that meets the organization's needs, designers and need to consider all of the following EXCEPT ___________.

    existing constraints
    external reporting requirements
    internal controls
    costs versus benefits

    The answer is external reporting requirements

    5. The term "cost center" is used indiscriminately to describe centers that may or may not be assigned responsibility for the capital investment.

    True or False

    The answer is False

    6. The following infromation pertains to Voyager Company:

    Total assets $50,000
    Total current liabilities $10,000
    Total expenses $60,000
    Total liabilities $15,000
    Total revenues $80,000
    IF invested capital is defined as total assets, a project earning an ROT of 12 percent should be:

    rejected
    accepted
    rejected if the desired rate of return is less than 12 percent
    rejected if the cost of capital is greater than 12 percent

    The answer is accepted

    7. A well-designed management control system ignores non-financial objectives and focuses on financial objectives to develop and report measures of performance.

    True or false

    The answer is False

    8. The following information pertains to Voyager Company.

    Total assets $50,000
    Total current liabilities $10,000
    Total expenses $60,000
    Total liabilities $15,000
    Total revenue $80,000

    If the invested capital is defined as total assets, the return on investment is

    160 percent
    40 percent
    57 percent
    25 percent

    The answer is 40 percent

    9. Why is decentralization likely to increase a firm's costs?

    A. Information costs rise as responsibility reports are needed
    B. Managers duplicate services that might be less expensive if centralized
    C. Neither managers duplicates services that might be less expensive if centralizes nor information costs rises as responsibility reports are needed. Decentralized reduces costs.
    D. Managers duplicate services that might be less expensive if centralized and information costs rise as responsibility reports are needed.

    The answer is C

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    https://brainmass.com/business/capital-budgeting/return-investment-product-department-88759

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    Solution Preview

    1. Gibson Company has tow production departments, Mixing and Finishing, served by a maintenance department. Bugeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data is as follows:

    Mixing Finishing
    Long-run capacity 18,000 12,000
    availability*
    Budgeted* 12,000 10,500
    Actual* 15,000 9,000

    * in labor hours

    Actual maintenance department costs were $36,000 fixed and $10,000 variable. The amount fo variable maintenance costs allocated to the Mixing Department should be ______________.

    A. $ 62,5000
    B. $72,000
    C. $48,000
    D. $60,000

    The answer is B

    2. Hammacher, Inc. has two departments, Get and Go. Relevant information is presented below:

    Get ...

    Solution Summary

    This solution provides the steps to calculate the return on investment. Long-run capacity is examined for the relevant data.

    $2.19

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