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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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