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36) The following is divisional information for Falcon Ente East Division West Division $200,000 $250,000 Operating income Net sales 1,575,000 2,225 Total assets at Jan.
36) The following is divisional information for Falcon Ente East Division West Division $200,000 $250,000 Operating income Net sales 1,575,000 2,225 Total assets at Jan. 11,500,000 1,200,000 840,000 1,000,000 Total assets at Dec .31 The target rate of return is 12% for the East Divisionand is 10% Compute residual income for each division. Show all computations. (10 for the West Divisio points) Lemon Drink Natural Flavors Facts S ial Accounting r 25 st 7 Nam Score Each multiple choice'quest ints for a total of 40 points. 1) Costs that do not differ between alternatives are A) relevant to the decision B) considered opportunity costs C) considered irrelevant to the decision D) important only if they represent a material dollar amount 2) Smith Industries is considering replacing a machine that is presently used in its production process. Replacement Old Machine Machine Original cost Remaining useful life in years $55 urrent age in years 33, value urrent disposal value in cash uture disposal value in cash (in 5 years) $9 S4 nnual cash operating costs Which of the information provided in the table is irrelevant to the replacement decision? A) the sales price of the new machine B) the original cost of the old machine C) the current disposal value of the old machine D) the annual cash operating costs 3) Which of following statements is true of short-term decision making? A) Fixed costs and variable costs must be analyzed separately B) All costs behave in the same way C) Unit manufacturing costs are variable costs. D) All costs involved in a decision are considered relevant. 4) Differential analysis is a method that A) evaluates both relevant and irrelevant information B) considers all areas of the traditional income statement C) is not used for short-term decision making D) looks at how operating income would differ under each decision alternative
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