1.

The Consumer Products Division of Goich Corporation had average operating assets
of $800,000 and net operating income of $81,300 in May. The minimum required
rate of return for performance evaluation purposes is 10%.
Reference: 12-19

What was the Consumer Products Division's minimum required return in May?

A) $81,300

B) $8,130

C) $88,130

D) $80,000

Feedback:

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 3
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): D

2.
Residual income is:

A) Net operating income plus the minimum required return on average

operating assets.

B) Net operating income less the minimum required return on average

operating assets.

C) Contribution margin plus the minimum required return on average operating

assets.
 D) Contribution margin less the minimum required return on average operating
assets.

Feedback: AACSB: Analytic

AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 3
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): B

3.
Azuki Corporation operates in two sales territories, urban and rural. Shown below is
last year's income statement segmented by territory:

Azuki's common fixed expenses were $25,000 last year.

Reference: 12-3

If urban sales were 10% higher last year, by approximately how much would
Azuki's net operating income have increased? (Assume no change in the revenue or
cost structure.)

A) $4,400

B) $6,400

C) $11,200

D) $32,000

Feedback:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 1
Level: Medium
Points Earned: 0.0/5.0
Correct Answer(s): C

4.
Deanda Products is a division of a major corporation. The following data are for the
last year of operations:

Reference: 12-14

The division's turnover is closest to:

A) 4.09

B) 0.16

C) 25.00

D) 3.51

Feedback: Turnover = Sales ÷ Average operating assets = $28,630,000 ÷

$7,000,000 = 4.09
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): A

5.
Beade Industries is a division of a major corporation. Last year the division had
total sales of $16,760,000, net operating income of $770,960, and average
operating assets of $4,000,000.
Reference: 12-17

The division's margin is closest to:

A) 28.5%

B) 23.9%

C) 4.6%

D) 19.3%

Feedback: Margin = Net operating income ÷ Sales = $770,960 ÷ $16,760,000 =

4.6%
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): C

6.
Azuki Corporation operates in two sales territories, urban and rural. Shown below is
last year's income statement segmented by territory:

Azuki's common fixed expenses were $25,000 last year.

Reference: 12-3

What was Azuki Corporation's overall net operating income for last year?
 A) $33,000

B) $45,000

C) $58,000

D) $83,000

Feedback:
AACSB: Analytic
AICPA BB: Critical Thinking
LO: 1
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): A

7.
Cecille Products is a division of a major corporation. Last year the division had total
sales of $7,940,000, net operating income of $254,080, and average operating
assets of $2,000,000. The company's minimum required rate of return is 12%.
Reference: 12-13

The division's return on investment (ROI) is closest to:

A) 2.6%

B) 12.7%

C) 0.4%

D) 50.4%

Feedback: ROI = Net operating income ÷ Average operating assets

= $254,080 ÷ $2,000,000 = 12.7%
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): B

8.
Last year the Uptown Division of Gorcen Enterprises had sales of $300,000 and a
net operating income of $24,000. The average operating assets at Uptown last year
amounted to $120,000.
Reference: 12-15

Last year at Uptown the return on investment was:

A) 8%

B) 12%

C) 20%

D) 40%

Feedback: ROI = Net operating income ÷ Average operating assets

= $24,000 ÷ $120,000 = 20%
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): C

9.
The West Division of Cecchetti Corporation had average operating assets of
$240,000 and net operating income of $42,200 in August. The minimum required
rate of return for performance evaluation purposes is 19%.
Reference: 12-18

What was the West Division's minimum required return in August?

A) $45,600

B) $42,200
 C) $53,618

D) $8,018

Feedback:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 3
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): A

10.
Deanda Products is a division of a major corporation. The following data are for the
last year of operations:

Reference: 12-14

The division's margin is closest to:

A) 4.0%

B) 16.4%

C) 24.4%

D) 28.4%

Feedback: Margin = Net operating income ÷ Sales = $1,145,200 ÷ $28,630,000 =

4.0%
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): A

11.
Ahartz Industries is a division of a major corporation. Data concerning the most
recent year appears below:

Reference: 12-16

The division's turnover is closest to:

A) 3.20

B) 17.54

C) 0.22

D) 3.91

Feedback: Turnover = Sales ÷ Average operating assets = $7,820,000 ÷

$2,000,000 = 3.91
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): D

12.
Cecille Products is a division of a major corporation. Last year the division had total
sales of $7,940,000, net operating income of $254,080, and average operating
assets of $2,000,000. The company's minimum required rate of return is 12%.
Reference: 12-13
The division's turnover is closest to:

A) 0.13

B) 3.52

C) 3.97

D) 31.25

Feedback: Turnover = Sales ÷ Average operating assets = $7,940,000 ÷

$2,000,000 = 3.97
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): C

13.
Tubaugh Corporation has two major business segments—East and West. In
December, the East business segment had sales revenues of $690,000, variable
expenses of $352,000, and traceable fixed expenses of $104,000. During the same
month, the West business segment had sales revenues of $140,000, variable
expenses of $56,000, and traceable fixed expenses of $24,000. The common fixed
expenses totaled $162,000 and were allocated as follows: $89,000 to the East
business segment and $73,000 to the West business segment.
Reference: 12-4

A properly constructed segmented income statement in a contribution format would

show that the segment margin of the East business segment is:

A) $352,000

B) $145,000

C) $234,000

D) $249,000
Feedback:
AACSB: Analytic
AICPA BB: Critical Thinking
LO: 1
Level: Easy
Points Earned: 0.0/5.0
Correct Answer(s): C

14.
The West Division of Cecchetti Corporation had average operating assets of
$240,000 and net operating income of $42,200 in August. The minimum required
rate of return for performance evaluation purposes is 19%.
Reference: 12-18

What was the West Division's residual income in August?

A) -$8,018

B) $3,400

C) -$3,400

D) $8,018

Feedback:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 3
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): C
15.
Miscavage Corporation has two divisions: the Beta Division and the Alpha Division.
The Beta Division has sales of $580,000, variable expenses of $301,600, and
traceable fixed expenses of $186,500. The Alpha Division has sales of $510,000,
variable expenses of $178,500, and traceable fixed expenses of $222,100. The total
amount of common fixed expenses not traceable to the individual divisions is
$235,500. What is the company's net operating income?

A) $374,400

B) $201,300

C) $609,900

D) ($34,200)

Feedback:
AACSB: Analytic
AICPA BB: Critical Thinking
LO: 1
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): D

16.
Ahartz Industries is a division of a major corporation. Data concerning the most
recent year appears below:
Reference: 12-16

The division's return on investment (ROI) is closest to:

A) 18.2%

B) 4.5%

C) 22.3%

D) 1.3%

Feedback: ROI = Net operating income ÷ Average operating assets

= $445,740 ÷ $2,000,000 = 22.3%
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): C

17.
Beade Industries is a division of a major corporation. Last year the division had
total sales of $16,760,000, net operating income of $770,960, and average
operating assets of $4,000,000.
Reference: 12-17

The division's turnover is closest to:

A) 21.74

B) 4.19

C) 3.51

D) 0.19
Feedback: Turnover = Sales ÷ Average operating assets = $16,760,000 ÷
$4,000,000 = 4.19
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): B

18.
Ferrar Corporation has two major business segments-Consumer and Commercial.
Data for the segment and for the company for March appear below:

In addition, common fixed expenses totaled $210,000 and were allocated as

follows: $122,000 to the Consumer business segment and $88,000 to the
Commercial business segment.
Reference: 12-6

The contribution margin of the Commercial business segment is:

A) $137,000

B) $184,000

C) $62,000

D) $423,000

Feedback:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 1
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): A

19.
Ferrar Corporation has two major business segments-Consumer and Commercial.
Data for the segment and for the company for March appear below:

In addition, common fixed expenses totaled $210,000 and were allocated as

follows: $122,000 to the Consumer business segment and $88,000 to the
Commercial business segment.
Reference: 12-6

A properly constructed segmented income statement in a contribution format would

show that the segment margin of the Consumer business segment is:

A) $164,000

B) $62,000

C) $394,000

D) $184,000

Feedback:
AACSB: Analytic
AICPA BB: Critical Thinking
LO: 1
Level: Easy
Points Earned: 0.0/5.0
Correct Answer(s): D

20.
The Consumer Products Division of Goich Corporation had average operating assets
of $800,000 and net operating income of $81,300 in May. The minimum required
rate of return for performance evaluation purposes is 10%.
Reference: 12-19

What was the Consumer Products Division's residual income in May?

A) -$1,300

B) $8,130

C) $1,300

D) -$8,130

Feedback:

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 3
Level: Easy
Points Earned: 5.0/5.0
Correct Answer(s): C

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