Share
Explore BrainMass

# ROE, Opportunity Costing, BE Point & Variable Cost

The Bowley Company manufactures several different products. Unit costs associated with product ICT101 are as follows: Direct materials \$60; Direct labor \$10; Variable support costs \$18; Fixed manufacturing support costs \$32; Sales commissions (2% of sales) \$4; Administrative salaries \$16; Total Costs \$140.Total variable costs associated with product ICT101 are:

a. \$18
b. \$22
c. \$88
d. \$92

You calculate a firm's return on sales (ROS) to be 11.0%. Its asset turnover (AT) ratio is 2.0x and the equity multiplier (EM) is 3.0x. The current ratio is 2.5x and the debt-to-asset ratio is 50%. Using the data, it is possible to conclude that the firm's ROE is:

a. 11.0%
b. 33.0%
c. 66.0%
d. 27.5%
e. None of the choices are correct

Bertram Enterprises offers to make Part V12 for \$55 per unit for ASBM Company. ASBM has relevant costs of \$65 per unit to manufacture Part V12. If there is excess capacity at ASBM, the opportunity cost (in terms only of the data given in this problem) to ASBM of buying Part V12 from the supplier:

a. Is zero
b. Is \$10,000
c. Is \$70,000
d. Cannot be determined using the above information

If the sales price per unit is \$200, the total fixed costs are \$200,000, and total variable costs at the 1,000 level of production amount to \$100,000, then the break-even volume in dollar sales is:

a. 1,000 units
b. 2,000 units
c. 3,000 units
d. Cannot be determined from the information provided

#### Solution Preview

The Bowley Company manufactures several different products. Unit costs associated with product ICT101 are as follows: Direct materials \$60; Direct labor \$10; Variable support costs \$18; Fixed manufacturing support costs \$32; Sales commissions (2% of sales) \$4; Administrative salaries \$16; Total Costs \$140.Total variable costs associated with product ICT101 are:

a. \$18
b. \$22
c. \$88
d. \$92