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Advanced Multiple Choice Quiz
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1A profit centre is responsible for generating revenue, but it is not responsible for controlling costs
(Learning Objective 1 Ch 14)
A)True
B)False


2If expenses exceed revenues in a department, then it would be termed a cost centre
(Learning Objective 1 Ch 14)
A)True
B)False


3Fenway Market has two stores, F and G. During February, Store F had a segment margin of £10,000, traceable fixed expenses of £26,000, and variable expenses equal to 55% of sales. Fenway Market as a whole had a combined segment margin of 15%, a contribution margin ratio of 40%, and total sales of £180,000. Based on this information, the traceable fixed expenses in Store G were:
(Learning Objective 2 Ch 14)
A)£19,000.
B)£17,000.
C)£30,000.
D)£36,000.


4Segmented income statements are most meaningful to managers when they are prepared
(Learning Objective 3 Ch 14)
A)on an absorption cost basis.
B)on a contribution basis.
C)on a cash basis.
D)in a single-step format.


5The next 3 questions are based on the following information The managers of Herwhno want to introduce a new product line. The financial performance of the company for the most recent year is given below:
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The company estimates that the required return on investment should be a minimum of 12%. Details of new product line The sales manager estimates that sales for the new product will be 420,000 units per annum if the selling price is £5.20 per unit. Variable costs are estimated to be £2.86 per unit. Fixed costs will increase by £900,000. A budget of £2,000,000 has been agreed for investment in new machinery.
Calculate the Return on Investment for the new investment of £2,000,000
(Learning Objective 4 Ch 14)
A)16.9%.
B)8.12%.
C)4.33%.
D)4.14%.


6Calculate the existing Return on Investment before the new investment.
(Learning Objective 4 Ch 14)
A)10.51%
B)16.64%
C)42.00%
D)60.98%


7Calculate the Return on Investment after the new investment is accepted
(Learning Objective 4 Ch 14)
A)14.1%.
B)14.8%.
C)15.65%.
D)22.10%.


8Which of the following would be considered an operating asset in return on investment computations?
(Learning Objective 4 Ch 14)
A)Land being held for plant expansion.
B)Treasury stock.
C)Accounts receivable.
D)Common stock.


9A company that is seeking to increase ROI should attempt to decrease
(Learning Objective 5 Ch 14)
A)sales.
B)turnover.
C)margin.
D)average operating assets.


10Residual income can be used most effectively in comparing the performance of divisions of different sizes
(Learning Objective 5 Ch 14)
A)True
B)False





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