Which of the following statements is true? There may be strategic reasons that a company would want to keep a product line that has a negative segment margin @ A company should never discontinue a product line O A company should always discontinue a product line if it has a negative segment margin. Kneyonce Bowles manufactures audio speakers. The company uses variable costing for internal management reports and absorption costing for external reporting. The company has provided the following data: Year 2 500 Inventories Beginning units Ending units) Variable Costing Net Operating income 250 $156.000 Direct Materials Cost per unit Direct Labor Cost per unit Variable Manufacturing Overhead per unit Fixed Manufacturing Overhead per unit Variable Selling and Administrative Expense per unit $ 200 $150 $ 100 $ 320 $75 Which costing method would report higher net operating income in Year 2? Variable Costing Absorption Costing Assume that a company is considering buying a new piece of equipment for $240,310 that would have a useful life of five years and no salvage value. The equipment would generate the following estimated annual revenues and expenses: $ 120,000 Incremental Revenues Incremental Operating Expenses: Commissions $ 15,000 Insurance 5.000 30.000 Maintenance Total incremental Operating Expenses Net Operating Income 50.000 $ 70,000 The internal rate of return for this investment is closest to: O 18% 14% 16% 12% Sea Drinks, Inc. is a producer of special sodas. The company is contemplating purchasing equipment for an additional processing fine. The company provided the following Information about the expected impact of purchasing the new equipment Incremental Revenues $100,000 per year Incremental Cash Operating Expenses $30,000 per year Purchase Price for New Equipment $200,000 Depreciation Expense (for New Equipment) $25,000 per year What is the simple rate of return for this equipment purchase? 35% 50% 52.5% 22.50