8 problems on accounting 497874

4.(TCO D) Financial data for Beaker Company for last year appear below.

The company paid dividends of $2,100 last year. The “Investment in Cedar Company” on the statement of financial position represents an investment in the stock of another company.

Required:

i. Compute the company’s margin, turnover, and return on investment for last year.

ii. The board of directors of Beaker Company has set a minimum required return of 20%. What was the company’s residual income last year?

5.Ferro Wares is a division of a major corporation. The following data are for the latest year of operations.

Required:

i. What is the division’s ROI?

ii. What is the division’s residual income? (Points : 15)

6. Tjelmeland Corporation is considering dropping product S85U. Data from the company’s accounting system appear below.

All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $55,000 of the fixed manufacturing expenses and $71,000 of the fixed selling and administrative expenses are avoidable if product S85U is discontinued.

Required:

i. According to the company’s accounting system, what is the net operating income earned by product S85U? Show your work!

ii. What would be the effect on the company’s overall net operating income of dropping product S85U? Should the product be dropped? Show your work!

7.(TCO D) Rosiek Corporation uses part A55 in one of its products. The company’s accounting department reports the following costs of producing the 4,000 units of the part that are needed every year.

An outside supplier has offered to make the part and sell it to the company for $32.30 each. If this offer is accepted, the supervisor’s salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier’s offer were accepted, only $4,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part A55 could be used to make more of one of the company’s other products, generating an additional segment margin of $26,000 per year for that product.

Required:

i. Prepare a report that shows the effect on the company’s total net operating income of buying part A55 from the supplier rather than continuing to make it inside the company.

ii. Which alternative should the company choose

Variable Costs

Direct Materials

$948,600

Direct Labor

$290,700

Selling and Administrative

$41,300

Fixed Costs

Manufacturing

$579,870

Selling and Administrative

$134,640