ACCT505 Practice Quiz #2

Student: ___________________________________________________________________________

1. Return on investment (ROI) can be decomposed into the asset turnover and the
A. gross margin ratio.
B. profit margin ratio.
C. operating margin ratio.
D. contribution margin ratio.

2. How will decreases in the following items affect return on investment (ROI)?

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A. a
B. b
C. c
D. d

3. The CJP Company produces 10,000 units of item S10 annually at a total cost of $190,000.

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The XYZ Company has offered to supply 10,000 units of S10 per year for $18 per unit. If CJP accepts the offer, $4 per unit of the fixed overhead would be saved. In addition, some of CJP's facilities could be rented to a third party for $15,000 per year. What are the relevant costs for the "make" alternative?
A. $160,000
B. $165,000
C. $175,000
D. $185,000

4. The following information is available about the Winter Division of Washburn Company.
Washburn requires a return of 9% from all divisions.

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Required: [Take all calculations to 4 decimal places]
a. Compute the ROI for the Winter Division.
b. Compute the residual income for the Winter Division.

5. Bayside Wholesaling has the following data for its three divisions for the year:

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Required:
a. Compute divisional operating income for each of the divisions. Assume taxes are 30%.
b. Calculate the gross margin ratio for each division.
c. Calculate the operating margin ratio for each division.
d. Calculate the profit margin ratio for each division.

6. The XYZ Manufacturing Company has two divisions: Division X and Division Y. Operating results for the two divisions for last year were as follows:

Division X Division Y
Residual income $98,400