Managerial Accounting Homework Questions

1.

The following information is available for Company A and Company B: Company A Company B Profit margin ratio 6.7% 19.7% Asset turnover ratio 3.1 0.8 Which company has the highest ROI and by how much (round to the nearest percent)? . Company B has an ROI that is 10 percentage points higher than Company A . Company A has an ROI that is 10 percentage points higher than Company B . Company B has an ROI that is 5 percentage points higher than Company A . Company A has an ROI that is 5 percentage points higher than Company B Rollins, Inc. has a division that manufactures a component that sells for $290 and has a variable cost of $145. Another division of the company wants to purchase the component. Fixed cost per unit of the component is $55. What is the minimum transfer price if the division manufacturing the component is operating below its capacity? 0 A. $55 0 B. $145 0 c. $200 0 D. $290 Bradley Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision? Replacement Old Machine Machine Original cost $55,000 $46,000 Remaining useful life in years 5 5 Current age in years 5 0 Book value $30,000 Current disposal value in cash $9,000 Future disposal value in cash (in 5 years) $0 $0 Annual cash operating costs $8,000 $4,000 Which of the information provided in the table is irrelevant to the replacement decision? 0 A. the annual cash operating costs for both machines 0 B. the sales price of the new machine 0 c. the current disposal value of the old machine 0 D. the original cost of the old machine Marionette Company manufactures dolls that are sold to various distributors. The company produces at full capacity for six months each year to meet peak demand; the manufacturing facility operates at 60% of capacity for the other six months of the year. The company has provided the following data for the year: No. of units produced and sold 600,000 units Sales price $50 per unit Variable manufacturing costs $10 per unit Fixed manufacturing costs $900,000 per year Variable selling and administrative costs $4 per unit Fixed selling and administrative costs $500,000 per year Marionette receives an otter to produce 5,000 dolls for a special event. This is a one - time opportunity during a period when the company has excess capacity. What is the minimum sales price the company should accept for the order? 0 A. $10 0 B. $14 0 C. $6 0 D. $50 Voltaic Electronics uses a standard part in the manufacture of different types of radius The total cost of producing 29.000 parts is $100,000, which includes xed costs of $40,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the xed costs Assume that the company can use the freed manufacturing space to make another product that can earn a prot of $15,000. If Voltaic outsources, what will be the effect on operating income? O A. increase of $25,000 0 B. decrease of $25,000 0 0. decrease of $8,000 0 D. increase of $15,000 Voltaic Electronics uses a standard part in the manufacture of different types of radius The total cost of producing 29.000 parts is $100,000, which includes xed costs of $40,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the xed costs Assume that the company can use the freed manufacturing space to make another product that can earn a prot of $15,000. If Voltaic outsources, what will be the effect on operating income? O A. increase of $25,000 0 B. decrease of $25,000 0 0. decrease of $8,000 0 D. increase of $15,000 Schmidt, Inc. is evaluating three possible investments in depreciable plant assets The company uses the straight - line method of depreciation. The following information is available: Investment A Investment B Investment C Initial capital investment $385,000 $320,000 $310,000 Estimated useful life 9 years 8 years 10 years Estimated residual value $20,000 $20,000 $35,000 Estimated annual net cash ow for each year $55,000 $49,000 $81,000 Required rate of return 12% 12% 12% Rank the projects as to order of preference if based on the best payback period. OA. C,A,B OB. A,B,C OC. C,B,A OD. B,C,A Brooks Company will receive $10,000 a year at the end of each of the next five years. Using a discount rate of 14%, the present value of the receipts can be stated as O A. PV = $10,000 x (PV factor, i = 14%, n = 5) O B. PV = $10,000 x (FV factor, i = 14%, n = 5) O C. PV = $10,000 x (Ordinary Annuity FV factor, i = 14%, n = 5) O D. PV = $10,000 x (Ordinary Annuity PV factor, i = 14%, n = 5)Stellan Manufacturing is considering the following two investment proposals: Proposal X Proposal Y Investment $738,000 $512,000 Useful life 5 years 4 years Estimated annual net cash inflows received at the end of each year $152,000 $98,000 Residual value $56,000 $0 Depreciation method Straight - line Straight - line Annual discount rate 10% 9% Compute the present value of the future cash inflows from Proposal Y. Present value of an ordinary annuity of $1: 8% 9% 10% 0.926 0.917 0.909 1.783 1.759 1.736 2.577 2.531 2.487 O U A W N - 3.312 3.240 3.170 3.993 3.809 3.791 4.623 4.486 4.355 . . . . . O A. $296,960 O B. $317,520 O C. $256,000 O D. $273, 152Odelea Corporation is considering an investment of $510,000 in a land development project. The investment will yield cash inows of $202,000 per year for fwe years. The company uses a discount rate of 9%. What is the net present value of the investment? Present value of an ordinary annuity of $1: 8% 9% 10% 1 0.926 0917 0.909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 4 3.312 3.24 3.17 5 3.993 3.89 3.791 O A. $202,000 0 B. $275,780 0 0. $336,600 0 D. $234,600