15) Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 30% and the weighted average cost of capital is 15%. Its effective tax rate is 40%. Sales Operating income Total assets Current liabilities $6,000,000 1,800,000 1,000,000 8 10,000 1 What is the division's Return on Investment (ROI)? A) 600.00% B) 30.00% C) 180.00% D) 81.00% 16) Harvest Company has a sales margin of 20%, operating income of $574,000, and capital turnover of 2.0. The sales in dollars for Harvest Company may be closest to A) $114,800. B) $287,000. C) $1,148,000. D) $2,870,000. 17) The Engine Division of The Cleveland Automotive Corporation had sales of $7,200,000 and operating income of $864,000 last year. The total assets of the Engine Division were $3,200,000 while current liabilities were $800,000. The Cleveland Automotive Corporation's target rate of return is 13% while its weighted average cost of capital is 9%. The effective tax rate for the company is 45%. Required: a. Calculate the sales margin. b. Calculate the capital turnover. c. Calculate the return on investment (ROI). d. Calculate the residual income. Answer: 18) The Jazz Division of Heights Recording Corporation had the following results last year. Sales Operating income Total assets Current liabilities $10,000,000 $2,200,000 $4,000,000 $2,500,000 Management's target rate of return is 12% and the weighted average cost of capital is 9%. Its effective tax rate is 40%. Required: a. Calculate the return on investment (ROI). b. Calculate the residual income. 19) Sitz Company makes chairs. The budgeted selling price is $55 per chair, the variable rate is $25 per chair and budgeted fixed costs are $20,000 per month. What is the budgeted operating income for 3100 chairs sold in a month? A) $97,500 B) $93,000 C) $73,000 D) $170,500 20) Everyone Deserves to Smile mobile dentist office budgeted for 4325 patient visits a year. Everyone Deserves to Smile actually saw 4415 patients during the year and they have provided the following data: Revenue Personnel Expenses Medical Supplies Occupancy Expenses Admin Expenses Fixed Portion for Variable Portion per Budget patient visit for Budget $75 $100,000 $13 $9000 $1.00 $19,000 $0.25 Actual Results $414,000 $94,000 $38,200 $18,000 $19,950 Based on the given information, what is the volume variance for revenue? A) $90 Favorable B) $0 C) $6750 Unfavorable D) $6750 Favorable
