28. One division of the Marvin Educational Enterprises has depreciable assets costing $4,800,000. The cash flows from these assets for the past three years have been:

Year		Cash flows
1		$	1,824,000
2		$	2,064,000
3		$	2,136,000

The current (i.e., replacement) costs of these assets were expected to increase 15% 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 historical cost and net book value?

	Year 1			Year 2			Year 3
A.	53.3	%		66.3	%		77.9	%
B.	31.1	%		41.3	%		49.3	%
C.	42.2	%		53.8	%		63.6	%
D.	38.0	%		43.0	%		44.5	%

Option A

Option B

Option C

Option D

29. The following information has been gathered for the Door Division:

Return on investment (ROI)		10	%
Sales	$	130,000
Operating assets	$	80,000
Cost of Capital		15	%
Profit margin		9.5	%

Compute the Door Division's residual income.

$12,350.

$5,200.

$350.

$7,150.

30. The Valenti Company uses flexible budgeting for cost control. Valenti produced 12,300 units of product during October, incurring indirect material costs of $14,900. Its master budget reflected indirect material costs of $202,800 at a production volume of 156,000 units. What was the flexible budget variance for the indirect material costs in October?

$2,000 favorable.

$1,090 favorable.

$700 favorable.

$700 unfavorable.