16. Janes Corporation recorded operating data for its Cheap division for the yea

Question

16. Janes Corporation recorded operating data for its Cheap division for the year. Janes requires its return to be 10%.Sales $ 700,000
Controllable margin 80,000
Total average assets 1,000,000
Fixed costs 50,000

What is the ROI for the year?
A) 8%
B) 70%
C) 5%
D) 3%

17. Dryden Manufacturing Company prepared a fixed budget of 40,000 direct labor hours, with estimated overhead costs of $200,000 for variable overhead and $60,000 for fixed overhead. Dryden then prepared a flexible budget at 38,000 labor hours. How much is total overhead costs at this level of activity?
A) $190,000
B) $250,000
C) $247,000
D) $260,000

18. If an investment center has generated a controllable margin of $90,000 and sales of $450,000, what is the return on investment for the investment center if average operating assets were $750,000 during the period?
A) 12%
B) 20%
C) 48%
D) 60%

19. The master budget of Rondelli Company shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:Indirect labor $480,000
Machine supplies 120,000
Indirect materials 140,000
Depreciation on factory building 100,000
Total manufacturing overhead $840,000

A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of
A) $988,000.
B) $840,000.
C) $1,008,000.
D) $908,000.

Explanation / Answer

16) A ROI = controllable margin/average operating assets 17) B Variable OH per DLH = $200,000/40,000 = $5/DLH Therefore at 38,000 hours = $5 x 38,000 = 190,000 Adding the fixed costs (regardless of DLH) 60,000 = 250,000 18) A Like Q16 19) A 480,000/50,000 = $9.6/MH Assuming machine supplies variable = 120,000/50,000 = $2.4/MH Materials = 140,000/50,000 = $2.8/MH Depreciation is a fixed cost At 60,000 hours: = (9.6 + 2.4 + 2.8) x 60,000hrs + depreciation = 888,000 + 100,000 988,000

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