91) What is the value of the operating assets belonging to the Tractor Division? 91)

A) $2 000 000 B) $1 750 000 C) $2 250 000 D) $2 500 000

 

Answer the following questions using the information below:

The top management at Munchie Company, a manufacturer of computer games, is attempting to recover from a flood that

destroyed some of their accounting records. The main computer system was also severely damaged. The following

information was salvaged:

Alpha Division Beta Division Gamma Division

Sales $2 500 000 (a) $1 150 000

Net operating profit $1 500 000 $650 000 $575 000

Operating assets (b) (c) $766 667

Return on investment 0.25 0.15 (d)

Return on sales (e) 0.10 0.5

Investment turnover (f) (g) 1.5

92) What is Beta Division's investment turnover? 92)

A) 2.4 B) 1.5 C) 0.15 D) 0.67

 

Answer the following questions using the information below:

The Bandage Medical Supply Company has two divisions that operate independently of one another. The financial data for

the year 2010 reported the following results:

North South

Sales $3 000 000 $2 500 000

Operating profit 750 000 550 000

Taxable income 650 000 375 000

Investment 6 000 000 5 000 000

The company's desired rate of return is 10%. Profit is defined as operating profit.

93) Which of the following is the correct formula for return on sales? 93)

A) Revenue/Investment B) Investment/Profit

C) Profit/Revenue D) Profit/Investment

 

Answer the following questions using the information below:

The top management at Munchie Company, a manufacturer of computer games, is attempting to recover from a flood that

destroyed some of their accounting records. The main computer system was also severely damaged. The following

information was salvaged:

Alpha Division Beta Division Gamma Division

Sales $2 500 000 (a) $1 150 000

Net operating profit $1 500 000 $650 000 $575 000

Operating assets (b) (c) $766 667

Return on investment 0.25 0.15 (d)

Return on sales (e) 0.10 0.5

Investment turnover (f) (g) 1.5

94) What were the sales for the Beta Division? 94)

A) $4 333 333 B) $5 952 380 C) $6 500 000 D) $7 151 800

 

95) What is the value of the operating assets belonging to the Beta Division? 95)

A) $4 333 333 B) $5 952 380 C) $6 500 000 D) $7 151 800

 

96) Which of the following statements is true? 96)

A) Governments in some countries may impose controls and limit selling prices of a company's

products.

B) The economic, legal, political, social, and cultural environments differ across countries.

C) Because of advances in telecommunications and transportation, the availability of materials

and skilled labour does not differ significantly across countries.

D) Both A and B are correct.

 

97) Ghan Rail Corporation, whose tax rate is 40%, has two sources of funds: long-term debt with a

market value of $8 000 000 and an interest rate of 8%, and equity capital with a market value of $12

000 000 and a cost of equity of 12%. Ghan Rail has two operating divisions, the Blue division and

the Gold division, with the following financial measures for the current year:

Total Assets Current Liabilities Operating Profit

Blue Div. $9 500 000 $2 800 000 $1 055 000

Gold Div. $11 000 000 $2 200 000 $1 200 000

Calculate EVA for the Gold Division.

97)

A) $397 440 B) -$82 560 C) $196 800 D) -$283 200

 

Answer the following questions using the information below:

Kambalda Harness Racing Incorporated manufactures horse carriages. The company has two divisions: Wheels and

Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation

measures. The following information is provided for 2014:

ASSETS PROFIT

Book value Current value Book value Current value

Wheels $485 000 $550 000 $120 000 $140 000

Assembly $750 000 $1 200 000 $160 000 $172 500

The company is currently using a 12% required rate of return.

98) What are Wheels and Assembly's return on investment based on book values, respectively? 98)

A) 0.14; 0.25 B) 0.25; 0.21 C) 0.21; 0.25 D) 0.25; 0.14

 

 

 

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