20. All other things equal, a company\'s return on investment (ROM) would genera
ID: 2593769 • Letter: 2
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20. All other things equal, a company's return on investment (ROM) would generally increase when: a: average operating assets increase. b: sales decrease c: operating expenses decrease. d: operating expenses increase 21: A company's return on investment is the: a: Margin divided by turnover b: margin multiplied by turnover c: turnover divided by average operating assets. d: turnover multiplied by average operating assets. 22: More company has two division, L and M. During July, the contribution margin in Division L was $6000. The contribution margin ratio in division M was 40% and its sales were $250,000 Division M's segment margin was $60,000. The common fixed expenses were $50,000 and the company net income was $20,000. The segment margin for Division L was: a: $0 b: $10,000 C: $50,000 d: $60,000 23: All other things being equal, if a division's traceable fixed expense increase: a: the division's contribution margin ratio will decrease b: the division's segment margin ratio will remain the same c: the division's segment margin will decrease. d: the overall company profit will remain the same. 24: The Lantern Corporation has 1,000 obsolete lanterns that are carried in inventory at a manufacturing cost of $20,000. if the lanterns are remacbined for $5,000, they could be sold for $9,000. Alternatively, the lanterns could be sold for scrap for $1,000. Which alternative is more describe and what are the total relevant costs for that alternative? a: remachine and $5,000 b: remachine and $ 25,000 c: scrap and $2,000 d:scrap and $19,000Explanation / Answer
Answer 20-c. operating expenses decrease ROI = Net Income / Cost of Investment (Total Assets) ROI will increase if the net income increase or cost of investment will decrease. All the option given above, Net Income only increase if the operating expenses decreases. So, option c is the correct option. Answer 21-b. Margin multiplied by turnover ROI = Net Income / Total Assets ROI = (Net Income / Sales) X (Sales / Total Assets) ROI = Margin X Turnover Answer 22-b. $10,000 Total Net Income 20,000 Common Fixed Expenses 50,000 Total Segment Margin 70,000 Division M - Segment Margin 60,000 Division L - Segment Margin 10,000 Answer 23-c. the division's segment margin will decrease. If the division traceable fixed expenses will increase, then the segment income margin will decreaes. Division Segment Income = Division Contribution - Segment Traceable Fixed Expenses Answer 24 a. remachine and $5,000 Here, the manufacturing costs of producing the Lanterns is a sunk cost, so it is not relevant cost. Remachined Sold as Scrap Sale Revenue 9,000 1,000 Relevant Cost - Remachined Cost 5,000 - Net Income 4,000 1,000 so, lanterns should be remachined and sold.
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