Holo Company reported the following financial numbers for one of its divisions for the year, average total assets of $5,870,000 sales of $5,445,000; cost of goods sold of $3,260,000; and operating expenses of $1,154,000. Assume a target Income of 14% of average invested assets. Compute residual income for the division Multiple Choice $144,340 $268,700 $144,387 $209.200 Butler Corporation is considering the purchase of new equipment costing $90,000. The projected annual after-tax net income from the equipment is $3,200, after deducting $30,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value Butler requires a 12% return on its Investments. The present value of an annuity of $1 for different periods follows: 0 Periods 2 3 123 0.8929 1.6901 2.4018 3.0373 4 What is the net present value of the machine? Multiple Choice 572054 S(10.260) Direct expenses are costs readily traced to a department because they are incurred for that department's sole benefit True or False True False An accounting system that is set up to control costs and evaluate managers' performance by assigning costs to the managers responsible for controlling them is called a(n): Multiple Choice Cost'accounting system Managerial accounting system Responsibility accounting system Financial accounting system A system of performance measures, including nonfinancial measures, used to assess company and division manager performance is Multiple Choice Hurdle rate Return on investment Balanced Scorecard Residual income Return on investment can be split into which of the following two measures? Multiple Choice Investment center income and profit margin Profit margin and net income Investment center average ossets and investment turnover Residual income and operating income. Profit margin and investment turnover. Kragle Corporation reported the following financial data for one of its divisions for the year, average invested assets of $470,000; sales of $930,000; and income of $105,000. The investment center profit margin is: Multiple Choice 22.3% 50.5% 1979% 447,6% Division X makes a part with the following characteristics: Production capacity Selling price to outside customers Variable cost per unit Fixed costs, total 25,000 units $ 18 $ 11 $100,000 Division of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division X refuses to accept the $17 price internally and Division Y continues to buy from the outside supplier, the company as a whole will be Multiple Choice O worse off by $70,000 each period better off by $10,000 each period Division A produces a part with the following characteristics: Capacity in units Selling price por unit Variable cost per unit Fixed cost per unit 30 50,000 $ $ 18 S 3 Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $28 per unit. If Division A sells to Division B. $1 in variable costs can be avoided. Suppose Division Als currently operating at capacity and can sell all of the units it produces on the outside market for its usual selling price. From the point of view of Division A, any sales to Division B should be priced no lower than Multiple Choice $22 $29 An opportunity cost is the potential benefit lost by taking a specific action when two or more alternative choices are available. True or False True False Incremental costs are the additional costs incurred if a company pursues a certain course of action True or False True False A sunk cost will change with a future course of action. True or False True False A sunk cost arises from a past decision and cannot be avoided or changed. True or False True False Sunk costs are irrelevant to future decisions. True or False True False An out-of-pocket cost requires a future outlay of cash and is relevant for current and future decision making True or False True False Significant sunk costs are relevant to decisions about the future, True or False True False Incremental costs should be considered in a make or buy decision True or False True False The decision to accept an additional volume of business should be based on a comparison of the revenue from the additional business with the sunk costs of producing that revenue True or False True False Wages from a job a student gives up to attend summer school would be a sunk cost. True or False True False A special order of goods or services should be accepted when the incremental revenue exceeds the normal revenue True or False True False