1. The sales revenue variance is favorable. The S&A expense variance is favorabl
ID: 2431818 • Letter: 1
Question
1.
The sales revenue variance is favorable.
The S&A expense variance is favorable.
The wage expense variance is unfavorable.
The cost of goods sold variance is favorable.
2.
Given the following information for Mako Company please answer the following questions:
Sales
$500,000
Turnover
3
Margin
0.15
Desired Rate of Return
20%
What is the Return on Investment?
45%
18%
20%
60%
3.
What amount of cash must be invested today in order to have $60,000 at the end of one year assuming the rate of return is 9%? (Do not round your PV factors.)
$45,454.56
$54,600.00
$54,000.00
$55,045.88
Sales
$500,000
Turnover
3
Margin
0.15
Desired Rate of Return
20%
Explanation / Answer
1 The incorrect statement is The S & A expense variance is favourable. Standard Actual Variance Sales Revenue 8,20,000 8,35,000 15,000 Favourable Wages 1,25,000 1,28,000 3,000 Unfavourable S & A expenses 4,00,000 4,08,000 8,000 Unfavourable Cost of goods sold 6,08,000 6,00,000 8,000 Favourable 2 Correct answer is 45% Margins = Net operating income / sales 0.15 = Net operating income /$5,00,000 Net operating income = $5,00,000 X 0.15 = $ 75,000 Turnover = Sales / Average operating assets 3 = $5,00,000 / Average operating assets Average operating assets = $5,00,000 / 3 $ 1,66,667 ROI = Net operating income / Average operating assets = $75,000 / $1,66,667 = 45% 3 Correct answer is $55,045.88 (a) P.v factor of $1 @9% = 0.917431193 (b) Amount to be received after 1 year = $ 60,000 (a) X (b) Amount to be invested today to get $60,000 = $ 55,045.88
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