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1. Deano Products is a division of a major corporation. The following data are for the last year of operations: The division's turnover is closest to: A) 32.26 B) 2.89 C) 0.10 D) 3.18 Feedback: Turnover = Sales Average operating assets = $19,080,000 $6,000,000 = 3.18 2. 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% Feedback: *Given Solve in the following steps: $60,000 + $40,000 = $100,000 $30,000 15% = $200,000 $450,000 - $200,000 = $250,000 $250,000 - $100,000 = $150,000 $30,000 + $40,000 = $70,000 $100,000 + $70,000 = $170,000 $450,000 - $170,000 = $280,000 $280,000 - $150,000 = $130,000 $170,000 - $100,000 = $70,000 $70,000 - $30,000 = $40,000 Total Fixed Expenses $40,000 + $100,000 = $140,000 Segment Margin Ratio - Store J $40,000 $250,000 = 16% 3. Ceder Products is a division of a major corporation. Last year the division had total sales of $21,520,000, net operating income of $538,000, and average operating assets of $8,000,000. The company's minimum required rate of return is 18%. The division's turnover is closest to: A) 2.52 B) 0.07 C) 40.00 D) 2.69 Feedback: Turnover = Sales Average operating assets = $21,520,000 $8,000,000 = 2.69 4. Return on investment (ROI) is equal to the margin multiplied by: A) sales. B) turnover. C) average operating assets. D) residual income. 5. Delmar Corporation is considering the use of residual income as a measure of the performance of its divisions. What major disadvantage of this method should the company consider before deciding to institute it? A) this method does not take into account differences in the size of divisions. B) investments may be adopted that will decrease the overall return on investment. C) the minimum required rate of return may eliminate desirable investments. D) residual income does not measure how effectively the division manager controls costs. 6. 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 Feedback: Residual income = Net operating income - Minimum required rate of return x Average operating assets = $20,000 - (12% x $150,000) = $2,000 7. 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.... View Full Document

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