Question 1:

Floppy Disk Inc. produces and sells recordable DVD and Blu-Ray packs. Revenue and cost information relating to the products follow:

Product

	DVD	Blu-Ray
Selling price per pack	$8.00	$20.00
Variable expenses per pack	$3.20	$10.50
Traceable fixed expenses per year	$138,000	$45,000

Common fixed expenses in the company total $105,000 annually. Last year the company produced and sold 37,500 DVD packs and 18,000 Blu-Ray packs.

Required:

1. Prepare a contribution-format income statement for the year, segmented by product lines.

Question 2:

Larinore Corporation has a Castings Division that does casting work of various types. The company's Machine Products Division has asked the Castings Division to provide it with 20,000 special castings each year on a continuing basis. The special castings would require $10 per unit in variable production costs. The Machine Products Division has a bid from an outside supplier of $29 per unit for the castings. In order to have time and space to produce the new castings, the Castings Division would have to cut back production of another casting: the RB4, which it presently is producing. The RB4 sells for $30 per unit, and requires $12 per unit in variable production costs. Boxing and shipping costs of the RB4 are $4 per unit. Boxing and shipping costs for the new special casting would be only $1 per unit. The company is now producing and selling 100,000 units of the RB4 each year. Production and sales of this casting would drop by 20% if the new casting is produced. Required:

1. What is the range of transfer prices within which both the divisions' profits would increase as a result of agreeing to the transfer of 20,000 castings per year from the Castings Division to the Machine Products Division?
2. Is it in the best interests of Larinore Corporation for this transfer to take place? Explain.

Question 3:

Financial data for Beaker Company for last year appear below:

	Beginning Balance	Ending Balance
Assets:
Cash	$50,000	$70,000
Accounts receivable	20,000	25,000
Inventory	30,000	35,000
Plant and equipment (net)	120,000	110,00
Total Assets	$220,000	$240,000

Beginning Balance	Ending Balance
Liabilities and owners equity
Accounts payable	$70,000	$90,000
Long-term debt	250,000	250,000
Owners equity	(100,000)	(100,000)
Total liabilities and owners equity	$220,000	$240,000

Beaker Company
Income Statement
Sales		$414,000
Less operating expenses		351,900
Net operating income		62,100
Less interest and taxes:
Interest expense	$30,000
Tax expense	10,000	40,000
Operating income		$22,100

Required:

1. Compute the company's margin, turnover, and return on investment for last year.

Question 4:

Outback Ltd. of Australia has two divisions, one in Perth and one in Darwin. Selected data on the two divisions follow:

	Perth	Darwin
Sales	$9,000,000	$20,000,000
Operating income	$630,000	$1,800,000
Average operating assets	$3,000,000	$10,000,000

Required:

1. Compute the return on investment (ROI) for each division.
2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division.
3. Is the Darwin Divisions greater residual income an indication that it is better managed? Explain.

Question 5:

Maximum Efficiency Inc. is interested in cutting the amount of time between when a customer places an order and when the order is completed. For the first quarter of the year, the following data were reported:

Inspection time	0.3
Process time	3.2
Wait time	12.0
Queue time	1.0
Move time	0.5

Required:

1. Compute the throughput time.
2. Compute the manufacturing cycle efficiency (MCE) for the quarter.
3. What percentage of the throughput time was spent on non-value-added activities?
4. Compute the delivery cycle time.
5. If by using lean production all queue time can be eliminated in production, what will be the new MCE?