The 2007 income statement for the cast division of the Home goods Company is as
ID: 2476446 • Letter: T
Question
The 2007 income statement for the cast division of the Home goods Company is as follows: Sales Operating expenses Net operating income Interest expense Earnings before taxes Tax expense (40%) Net Income If this division's invested capital is $3,000,000 then its return on investment is: A)20%. B)15%. C)17% D)12%. 23. If a manager is evaluated based on ROI, and is managing a division which has attained a high ROI. the manager A)may not want to invest in projects that have an ROI that is higher than the firm's cost of capital, but lower than the division's ROI. B)should invest in projects that have an ROI lower than the firm's cost of capital. C)should only consider projects that haw a negative NPV. D)may prefer to invest in projects that have an ROI that is very close to the firm's cost of capital. 24. A company's flexible budget for 12.000 units of production showed vales. $48,000: variable costs. $18,000; and fixed costs. $16,000. The operating income expected if the company produces and sells 16.000 units is: A.$2,667. B.$14,000 C.$18,667. D.$24,000 E.$35,000. 25. In preparing a corporate master budget, which of the following is most likely to be prepared lasi? A)Sales budget B)Cash budget C)Production budget D)Cost of goods sold budgetExplanation / Answer
22. Return on Investment = Net Income / Investment * 100
= 360000 / 3000000 * 100 = 12%
23. A option is correct. The manager may not want to invest in projects that have an ROI that is higher that the firms cost of capital but lower than the division's ROI. Because he will always want to maintain the division's ROI.
24. Operating Income = Sales - Variable Costs - Fixed Cost
= $48000 - $18000 - $16000 = $14000
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