Acct 505 Quiz 3

(TCO D) Data for December concerning Dinnocenzo Corporation's two major business segments-Fibers and Feedstocks-appear below:

Sales revenues, Fibers

$870,000

Sales revenues, Feedstocks

$820,000

Variable expenses, Fibers

$426,000

Variable expenses, Feedstocks

$344,000

Traceable fixed expenses, Fibers

$148,000

Traceable fixed expenses, Feedstocks

S156,000

Common fixed expenses totaled $314,000 and were allocated as follows: $129,000 to the Fibers business segment and $185,000 to the Feedstocks business segment.

Required:

Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

(Points : 15)

2. (TCO D) Wryski Corporation had net operating income of $150,000 and average operating assets of $500,000. The company requires a return on investment of 19%.

Required:

i. Calculate the company's current return on investment and residual income.

ii. The company is investigating an investment of $400,000 in a project that will generate annual net operating income of $78,000. What is the ROI of the project? What is the residual income of the project? Should the company invest in this project? (Points : 15)

3. (TCO D) The management of Drummer Corporation is considering dropping product D84L. Data from the company's accounting system appear below.

Sales $800,000

Variable Expenses $440,000

Fixed Manufacturing Expenses $248,000

Fixed Selling and Administrative Expenses $184,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $201,000 of the fixed manufacturing expenses and $156,000 of the fixed selling and administrative expenses are avoidable if product D84L is discontinued.

Required:

What would be the effect on the company's overall net operating income if product D84L were dropped? Should the...