SysRiq 8 e the followng information for questions 11 h I1 through 15 Redride Pro

Question

SysRiq 8 e the followng information for questions 11 h I1 through 15 Redride Products, Ine. has two divisions: North and South. The following data are available for the South Division and the single product i: makes S20 512 s 280,000 S1,500,000 Unit selling price Variable cost per unit Annual fixed cost A verage operating assets Use these data to answer the next otherwise five questions. These questions are independent of each other unless stated How many units must South sell each year to have an ROI of 16%? 240,000 1,300,000 52,000 e None of these (246,000 a8,(20-12) If South wants an ROI of 20% and wishes to sell 50.000 units, what price mustbe charged instead of the given selling price? S29.50 S27.30 $25.80 S23.60 e. None of these If South wants a residual income of $50,000 and the mmimum desired ROI is 10%, the annual turnover will have to be 0.32 0.80 1.25 1.50 d. e. None of these Next year South has a budgeted volume of 80,000 units, of which 10,000 units are expected to be ght by North Division. However, North Division has received an offer from an outside firm to supply the 10,000 units at $18 each. If South fails to meet the $18 price, North will buy from the outside; in such a case South would save $40,000 in fixed costs (as a result of discharging a salaried employce) since its volume uld drop to 70,000 units. Assuming that South meets the S18 price, South's profit for the year would be a. $360,000 b. $340,000 $300,000 $240,000 None of these d. Assume the same information as in question 14 except that South does not meet the $18 price. The effect of this on the total annual profit of Redride is a, $60,000 decrease b. $40,000 increase c. $20,000 decrease d. $10,000 increase e. None of these

Explanation / Answer

ans 1 is correct Ans 2 net operating Income 20%*1500000 300000 Add:Annual fixed cost $280,000 Contribution Margin 580000 per unit 580000/50000 11.6 Variable cost $12 Selling price $23.6 Option d Net operating Income-(Turnover*10%)=$50000 (240000-50000)/.1 1900000 1900000/1500000 1.27 None of the above ans 4 Sales (70000*20)+(10000*18) 1580000 Less: variable cost (80000*12) 960000 Contribution margin 620000 Less: fixed cost 280000 Net operating Income 340000 Option B $340000 is correct ans 5 Loss of contribution margin $60,000 ($6*10000) Less: Avoildable fixed cost 40000 Decraese in profit $20,000 Option C $20000 decrease

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