Question
1. Exhibit 11-4 The following information is for two divisions at Wiley Company. Couch Division Chair Division Sales ? $6,000,000 Operating income ? $ 560,000
1. Exhibit 11-4 The following information is for two divisions at Wiley Company.
| Couch Division | Chair Division | |
| Sales | ? | $6,000,000 |
| Operating income | ? | $ 560,000 |
| Operating profit margin | 11.0% | ? |
| Average operating assets | $1,250,000 | $ 4,000,000 |
| Asset turnover | 2.0 | ? |
| ROI | ? | ? |
Refer to Exhibit 11-4. What is the ROI for the Couch Division (rounded to the nearest tenth of a percent)?
a- 5.5%
b- 22.0%
c- None of the answer choices is correct.
d- 9.0%
e- 12.5%
2. Exhibit 11-2 Manford Inc. has two divisions Refrigerators and Dish Washer.
| Manford Company | ||
| Segmented Income Statements | ||
| For the Current Fiscal Year Ended December 31 | ||
| Refrigerator | Dish Washer | |
| Division | Division | |
| Sales | $10,000,000 | $5,400,000 |
| Cost of goods sold | 4,200,000 | 2,660,000 |
| Gross margin | 5,800,000 | 2,740,000 |
| Allocated overhead (from corporate) | 940,000 | 740,000 |
| Selling and administrative expenses | 780,000 | 360,000 |
| Operating income | 4,080,000 | 1,640,000 |
| Income tax expense (45%) | 1,836,000 | 738,000 |
| Net income | $ 2,244,000 | $ 902,000 |
Refer to Exhibit 11-2. Assume the Dish Washer Division has average operating assets totaling $6,560,000 for the year and the company's cost of capital rate is 15 percent. What is the residual income for the Dish Washer division?
a- $246,000
b- $656,000
c- $2,084,000
d- $4,744,000
e- None of the answer choices is correct.
3. Exhibit 11-1 Ashville Company has two divisions Bikes and Trikes.
| Ashville Company | ||
| Segmented Income Statements | ||
| For the Current Fiscal Year Ended December 31 | ||
| Bikes Division | Trikes Division | |
| Sales | $2,400,000 | $1,000,000 |
| Cost of goods sold | 1,400,000 | 530,000 |
| Gross margin | 1,000,000 | 470,000 |
| Allocated overhead (from corporate) | 270,000 | 170,000 |
| Selling and administrative expenses | 190,000 | 140,000 |
| Operating income | 540,000 | 160,000 |
| Income tax expense (40%) | 216,000 | 64,000 |
| Net income | $ 324,000 | $ 96,000 |
Refer to Exhibit 11-1. Using the segmented income statements, what is the profit margin ratio for the Bikes Division (to the nearest tenth of a percent)?
a- None of the answer choices is correct.
b- 41.7%
c- 58.3%
d- 13.5
e- 22.5%
4. Exhibit 11-2 Manford Inc. has two divisions Refrigerators and Dish Washer.
| Manford Company | ||
| Segmented Income Statements | ||
| For the Current Fiscal Year Ended December 31 | ||
| Refrigerator | Dish Washer | |
| Division | Division | |
| Sales | $10,000,000 | $5,400,000 |
| Cost of goods sold | 4,200,000 | 2,660,000 |
| Gross margin | 5,800,000 | 2,740,000 |
| Allocated overhead (from corporate) | 940,000 | 740,000 |
| Selling and administrative expenses | 780,000 | 360,000 |
| Operating income | 4,080,000 | 1,640,000 |
| Income tax expense (45%) | 1,836,000 | 738,000 |
| Net income | $ 2,244,000 | $ 902,000 |
Refer to Exhibit 11-2. Assume the Refrigerator Division has average operating assets totaling $24,000,000 for the year. What is the division's return on investment (to the nearest hundredth of a percent)?
a- 24.17%
b- 40.80%
c- 58.00%
d- None of the answer choices is correct.
e- 17.00%
5. Cambridge Products manufactures and sells cat toys and cat beds. The Bed Division incurs the following costs for the production of a single cat bed when 5,000 beds are produced each year.
| Direct materials | $8.00 |
| Direct labor | 5.50 |
| Variable overhead | 2.50 |
| Fixed overhead | 2.00 |
| Total cost | $18.00 |
The company sells cat beds to various pet stores for $26.00. The Toy Division is doing a promotion whereby each customer that purchases ten cat toys during the months of January, February, and March will receive a free cat bed. The Toy Division would like to purchase these beds from the Bed Division. Assuming the Bed Division is at full capacity, what is the optimal transfer price?
a- $ 26.00
b- $13.50
c- None of the answer choices is correct.
d- $18.00
e- $16.00
6. Exhibit 11-4 The following information is for two divisions at Wiley Company.
| Couch Division | Chair Division | |
| Sales | ? | $6,000,000 |
| Operating income | ? | $ 560,000 |
| Operating profit margin | 11.0% | ? |
| Average operating assets | $1,250,000 | $ 4,000,000 |
| Asset turnover | 2.0 | ? |
| ROI | ? | ? |
Refer to Exhibit 11-4. What is the asset turnover for the Chair Division (rounded to the nearest tenth)?
a- None of the answer choices is correct.
b- 1.5
c- 0.7
d- 0.1
e- 7.1
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Intermediate Accounting
Authors: Kin Lo, George Fisher
3rd Edition Vol. 1
133865940, 133865943, 978-7300071374
