1. Huntsman Chem Corp manufactures three chemicals (AN21, BC31, and KN43) from a joint process. At the split-off point, the three chemicals are already in an industrial grade form and can be sold to end users. They can, however, be processed further into a premium grade. Costs related to each product are as follows:

AN21 BC31 KN43 Sales value at split-off point $ 16,000 $ 12,000 $ 5,000 Allocated joint costs $ 6,000 $ 6,000 $ 6,000 Sales value after further processing $ 20,000 $ 18,000 $ 9,000 Cost of further processing $ 5,000 $ 3,000 $ 2,000

For which product(s) above would it be more profitable for Huntsman Chem to sell at the split-off point rather than process further?

a. BC31 and KN43 only

b. AN21 only

c. AN21 and KN43 only

d. KN43 only

2. AC Repair Company produced and sells portable window AC units. AC Repair has the annual capacity to manufacture and sell 80,000 ACs, but is currently only manufacturing and selling 60,000 units. The following data relates to the company's annual operations (at 60,000 units):

Per Unit Selling price $ 125 Manufacturing costs: Variable $ 25 Fixed $ 40 Selling and administrative costs: Variable $ 10 Fixed $ 15

The City of Mesa would like to purchase 3,000 AC units from AC Repair but only if they can get them for $75 each. Variable selling and administrative costs on this special order will drop down to $2 per unit. This special order will not affect the 60,000 regular sales and it will not affect the total fixed costs. The annual financial advantage (or disadvantage) for the company as a result of accepting this special order from the City of Mesa should be:

a. ($129,000)

b. $144,000

c. ($21,000)

d. $24,000

3. Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 14%. If a division has a residual income of $7,000, then its ROI is less than 14%.

True

False

4.if there is an increase in the interest expense for that segment, which of the following segment performance measures will decrease?

Residual Income Return on Investment

A) Yes Yes B) No Yes C) Yes No D) No No