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1.

The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%.
Reference: 12-19

What was the Consumer Products Division's minimum required return in May? A) $81,300 B) $8,130 C) $88,130 D) $80,000 Feedback:

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): D

2. Residual income is: A) Net operating income plus the minimum required return on average operating assets. B) Net operating income less the minimum required return on average operating assets. C) Contribution margin plus the minimum required return on average operating assets.

D) Contribution margin less the minimum required return on average operating assets. Feedback: AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): B

3. Azuki Corporation operates in two sales territories, urban and rural. Shown below is last year's income statement segmented by territory:

Azuki's common fixed expenses were $25,000 last year.


Reference: 12-3

If urban sales were 10% higher last year, by approximately how much would Azuki's net operating income have increased? (Assume no change in the revenue or cost structure.) A) $4,400 B) $6,400 C) $11,200 D) $32,000

Feedback: AACSB: Analytic

AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium

Points Earned: 0.0/5.0 Correct Answer(s): C

4. Deanda Products is a division of a major corporation. The following data are for the last year of operations:

Reference: 12-14

The division's turnover is closest to: A) 4.09 B) 0.16 C) 25.00 D) 3.51 Feedback: Turnover = Sales Average operating assets = $28,630,000 $7,000,000 = 4.09 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): A

5.

Beade Industries is a division of a major corporation. Last year the division had total sales of $16,760,000, net operating income of $770,960, and average operating assets of $4,000,000.
Reference: 12-17

The division's margin is closest to: A) 28.5% B) 23.9% C) 4.6% D) 19.3% Feedback: Margin = Net operating income Sales = $770,960 $16,760,000 = 4.6% AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): C

6. Azuki Corporation operates in two sales territories, urban and rural. Shown below is last year's income statement segmented by territory:

Azuki's common fixed expenses were $25,000 last year.


Reference: 12-3

What was Azuki Corporation's overall net operating income for last year?

A) $33,000 B) $45,000 C) $58,000 D) $83,000

Feedback: AACSB: Analytic AICPA BB: Critical Thinking LO: 1 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): A

7. Cecille Products is a division of a major corporation. Last year the division had total sales of $7,940,000, net operating income of $254,080, and average operating assets of $2,000,000. The company's minimum required rate of return is 12%.
Reference: 12-13

The division's return on investment (ROI) is closest to: A) 2.6% B) 12.7% C) 0.4% D) 50.4% Feedback: ROI = Net operating income Average operating assets = $254,080 $2,000,000 = 12.7% AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): B

8. Last year the Uptown Division of Gorcen Enterprises had sales of $300,000 and a net operating income of $24,000. The average operating assets at Uptown last year amounted to $120,000.
Reference: 12-15

Last year at Uptown the return on investment was: A) 8% B) 12% C) 20% D) 40% Feedback: ROI = Net operating income Average operating assets = $24,000 $120,000 = 20% AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): C

9. The West Division of Cecchetti Corporation had average operating assets of $240,000 and net operating income of $42,200 in August. The minimum required rate of return for performance evaluation purposes is 19%.
Reference: 12-18

What was the West Division's minimum required return in August? A) $45,600 B) $42,200

C) $53,618 D) $8,018

Feedback: AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): A

10. Deanda Products is a division of a major corporation. The following data are for the last year of operations:

Reference: 12-14

The division's margin is closest to: A) 4.0% B) 16.4% C) 24.4% D) 28.4% Feedback: Margin = Net operating income Sales = $1,145,200 $28,630,000 = 4.0% AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting

LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): A

11. Ahartz Industries is a division of a major corporation. Data concerning the most recent year appears below:

Reference: 12-16

The division's turnover is closest to: A) 3.20 B) 17.54 C) 0.22 D) 3.91 Feedback: Turnover = Sales Average operating assets = $7,820,000 $2,000,000 = 3.91 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): D

12. Cecille Products is a division of a major corporation. Last year the division had total sales of $7,940,000, net operating income of $254,080, and average operating assets of $2,000,000. The company's minimum required rate of return is 12%.
Reference: 12-13

The division's turnover is closest to: A) 0.13 B) 3.52 C) 3.97 D) 31.25 Feedback: Turnover = Sales Average operating assets = $7,940,000 $2,000,000 = 3.97 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): C

13. Tubaugh Corporation has two major business segmentsEast and West. In December, the East business segment had sales revenues of $690,000, variable expenses of $352,000, and traceable fixed expenses of $104,000. During the same month, the West business segment had sales revenues of $140,000, variable expenses of $56,000, and traceable fixed expenses of $24,000. The common fixed expenses totaled $162,000 and were allocated as follows: $89,000 to the East business segment and $73,000 to the West business segment.
Reference: 12-4

A properly constructed segmented income statement in a contribution format would show that the segment margin of the East business segment is: A) $352,000 B) $145,000 C) $234,000 D) $249,000

Feedback: AACSB: Analytic AICPA BB: Critical Thinking LO: 1 Level: Easy

Points Earned: 0.0/5.0 Correct Answer(s): C

14. The West Division of Cecchetti Corporation had average operating assets of $240,000 and net operating income of $42,200 in August. The minimum required rate of return for performance evaluation purposes is 19%.
Reference: 12-18

What was the West Division's residual income in August? A) -$8,018 B) $3,400 C) -$3,400 D) $8,018

Feedback: AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): C

15. Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $580,000, variable expenses of $301,600, and traceable fixed expenses of $186,500. The Alpha Division has sales of $510,000, variable expenses of $178,500, and traceable fixed expenses of $222,100. The total amount of common fixed expenses not traceable to the individual divisions is $235,500. What is the company's net operating income? A) $374,400 B) $201,300 C) $609,900 D) ($34,200)

Feedback: AACSB: Analytic AICPA BB: Critical Thinking LO: 1 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): D

16. Ahartz Industries is a division of a major corporation. Data concerning the most recent year appears below:

Reference: 12-16

The division's return on investment (ROI) is closest to: A) 18.2% B) 4.5% C) 22.3% D) 1.3% Feedback: ROI = Net operating income Average operating assets = $445,740 $2,000,000 = 22.3% AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): C

17. Beade Industries is a division of a major corporation. Last year the division had total sales of $16,760,000, net operating income of $770,960, and average operating assets of $4,000,000.
Reference: 12-17

The division's turnover is closest to: A) 21.74 B) 4.19 C) 3.51 D) 0.19

Feedback: Turnover = Sales Average operating assets = $16,760,000 $4,000,000 = 4.19 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): B

18. Ferrar Corporation has two major business segments-Consumer and Commercial. Data for the segment and for the company for March appear below:

In addition, common fixed expenses totaled $210,000 and were allocated as follows: $122,000 to the Consumer business segment and $88,000 to the Commercial business segment.
Reference: 12-6

The contribution margin of the Commercial business segment is: A) $137,000 B) $184,000 C) $62,000 D) $423,000

Feedback: AACSB: Analytic

AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): A

19. Ferrar Corporation has two major business segments-Consumer and Commercial. Data for the segment and for the company for March appear below:

In addition, common fixed expenses totaled $210,000 and were allocated as follows: $122,000 to the Consumer business segment and $88,000 to the Commercial business segment.
Reference: 12-6

A properly constructed segmented income statement in a contribution format would show that the segment margin of the Consumer business segment is: A) $164,000 B) $62,000 C) $394,000 D) $184,000

Feedback: AACSB: Analytic

AICPA BB: Critical Thinking LO: 1 Level: Easy

Points Earned: 0.0/5.0 Correct Answer(s): D

20. The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%.
Reference: 12-19

What was the Consumer Products Division's residual income in May? A) -$1,300 B) $8,130 C) $1,300 D) -$8,130 Feedback:

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy

Points Earned: 5.0/5.0 Correct Answer(s): C

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