Question
14. Frocks and Gowns, Inc., has two divisions, Day Wear and Night Wear. The Day Wear Division has an investment base of $740,000 and produces
14. Frocks and Gowns, Inc., has two divisions, Day Wear and Night Wear. The Day Wear Division has an investment base of $740,000 and produces (and sells) 105,000 units of Collars at a market price of $12.50 per unit. Variable costs total $5.30 per unit, and fixed charges are $4.50 per unit (based on a capacity of 125,000 units). The Night Wear Division wants to purchase 24,000 units of Collars from The Day Wear Division. However, the Night Wear Division is only willing to pay $9.00 per unit.
What is the contribution margin for the Day Wear Division if it transfers 24,000 units to the Night Wear Division at $9.00 per unit?
$945,000.
$816,000.
$283,500.
$756,000.
15. One division of the Marvin Educational Enterprises has depreciable assets costing $4,900,000. The cash flows from these assets for the past three years have been:
Year | Cash flows | |||
1 | $ | 1,911,000 | ||
2 | $ | 2,156,000 | ||
3 | $ | 2,205,000 | ||
The current (i.e., replacement) costs of these assets were expected to increase 20% each year. Marvin used the straight-line depreciation method; the estimated useful life is 10-years with no salvage value. For return on investment (ROI) calculations, Marvin uses end-of-year balances. What is the ROI using current costs and gross book value?
Year 1 | Year 2 | Year 3 | ||||||
A. | 32.5 | % | 30.6 | % | 26.0 | % | ||
B. | 25.6 | % | 22.7 | % | 22.2 | % | ||
C. | 27.0 | % | 29.6 | % | 27.7 | % | ||
D. | 22.5 | % | 20.6 | % | 16.0 | % | ||
Option A
Option B
Option C
Option D
21. Cordner Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows:
Proportion of Services Used by: | |||||||||||
Department | Direct costs | S1 | S2 | P1 | P2 | ||||||
S1 | $ | 66,000 | 0.70 | 0.10 | 0.20 | ||||||
S2 | $ | 106,000 | 0.20 | 0.30 | 0.50 | ||||||
P1 | $ | 175,000 | |||||||||
P2 | $ | 236,000 | |||||||||
Under the step-method of cost allocation, the amount of costs allocated from S2 to P2 would be:
$95,125.
$53,000.
$65,500.
$56,250.
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