Student Name

$19.$ Jasper Recording Studio has a current return on investment of $10\%$ and the company has established an $8\%$ minimum rate of return for the division. The division manager has two investment projects available, for which the following estimates have been made:

Project A $-$ annual controllable margin $=$$$24,000,$ operating assets $=$$$400,000$

Project B $-$ annual controllable margin $=$$$64,000,000,$ operating assets $=$$$400,000$

Which project should be funded?

a$)$ both projects

b$)$ Project $A$

c$)$ Project B

d$)$ neither project

$20.$ Which one of the following is a distinguishing characteristic of an investment centre?

a$)$ It includes significant uncontrollable fixed costs.

b$)$ Performance can be evaluated using both profitability and return on utilizing assets.

c$)$ This type of responsibility centre only generates revenues.

d$)$ Revenues are rarely generated by selling products.

$21.$ In CVP analysis, what does the term "cost" mean?

a$)$ It includes all fixed and variable costs of products.

b$)$ It includes all costs that are part of cost of goods sold.

c$)$ It includes manufacturing costs plus selling and administrative expenses.

d$)$ It includes all manufacturing costs.

$22.$ When using the CVP income statement, which of the following will result from an increase of one unit sold?

a$)$ Variable costs will increase in direct relation to the contribution margin ratio.

b$)$ Variable costs will decrease in direct relation to the contribution margin ratio.

c$)$ Every unit of product sold will decrease income by the contribution margin.

d$)$ Every unit of product sold will increase income by the contribution margin.

$23.$ What does the margin of safety measure?

a$)$ how much prices can be changed before the CVP analysis is no longer valid

b$)$ how much sales can drop before the firm has an operating loss

c$)$ how much fixed costs can drop before the firm has an operating loss

d$)$ how much variable costs can rise before the firm has an operating loss