QUIZ 5_ACC312-Platt-Spr07_SOLUTION

QUIZ 5_ACC312-Platt-Spr07_SOLUTION - 4. Invested Capital...

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ACC 312 QUIZ #5 NAME VERSION A Section (circle): 11:00 12:30 2:00 1. Given the following standard per-unit data, what transfer price would be set by the General Transfer Pricing Rule for a company that has excess production capacity? DL = $1.00 DM = $1.50 VOH=$2.00 FOH=$3.00 Special setup (not incurred on regular external sales)=$0.25 Price to external market=$10.00 a. $2.25 b. $4.75 c. $7.75 d. $10.00 e. $10.25 2. Which one of the following is not a traditional responsibility center? a. Budget center b. Revenue center c. Investment center d. Cost center. e. Profit center Refer to the following data to answer the next three questions: Austin Co. has the following results for 2006: Income $900,000 Cost of equity 15% Invested capital $6,000,000 Cost of debt 10% Imputed interest rate 14% Tax rate 30% 3. Compute the 2006 residual income for Austin Co. a. -$300,000 b. $0 c. $60,000 d. $300,000 e. Cannot be determined from the information provided
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Unformatted text preview: 4. Invested Capital above must be which of the following if we use it to compute EVA? a. Total Assets b. Total Liabilities c. Owners Equity d. Total Assets Short-term Liabilities e. Owners Equity + Fixed Assets 5. If the Sales Margin for Austin Co. is 5%, compute Capital Turnover. a. 0.15 b. 3.00 c. 6.67 (rounded) d. 9.52 (rounded) e. Cannot be determined from the information provided Answers Here d b a c b TP = Additional Outlay Cost + Opportunity Cost = (VC + Special costs) + (None: No lost CM on external orders because of excess capacity) = (1+1.5+2+.25) + ($0) = $4.75 RI = Income (Inv Capital x Imputed Interest Rate) = $900k ($6M x 14%) = $60,000 SM = 5% = Income / Sales = $900k / Sales so Sales = $18M and CT = Sales / InvCapital = $18M / $6M = 3.00 or ROI = SM x CT ($900k / $6M) = 5% x CT Same answer....
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