chapter 11 part ii

Question 1

_________ costs arise because of the existence of a particular segment.

Answer 1

Traceable

Question 2

_______cost that supports more than one segment but that would not go away if any particular segment were eliminated?

Answer 2

Common

Question 3

no iphone division means…no iphone division manager are examples of __________costs.

Answer 3

traceable

Question 4

no iphone division but…we still have a company CEO are examples of ________costs.

Answer 4

common

Question 5

ROI =

Answer 5

Net operating income / Average operating assets

Question 6

income before interest and taxes (EBIT) is referred to as ____________

Answer 6

net operating income

Question 7

cash, accounts receivable, inventory, plant and equipment, and other productive assets are called __________.

Answer 7

average operating assets

Question 8

Redmond Awnings, a division of Wrapup Corp., has a net operating income of $60,000 and average operating assets of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the division’s ROI?

a. 25%
b. 5%
c. 15%
d. 20%

Answer 8

d. 20%

Question 9

Redmond Awnings, a divison of Wrapup Corp., has a net operating income of $60,000 and average operating assets of $300,000. If the manager of the divison is evaluated based on ROI, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?

a. Yes
b. No

Answer 9

ROI = $78,000/$400,000 = 19.5%

This lowers divison’s ROI from 20.0% down to 19.5%.

Question 10

Redmond Awnings, a division of Wrapup Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the division’s residual income?

a. $240,000
b. $45,000
c. $15,000

Answer 10

c. $15,000

residual income = net operating income - (Average operating assets * minimum ROI)