In: Accounting
1. The following data relate to Logan Electric and its Lightbulb Division.
Lightbulb Division sales |
$8,500,000 |
Lightbulb Division operating income |
$510,000 |
Lightbulb Division total assets |
$2,500,000 |
Lightbulb Division current liabilities |
$560,000 |
Corporate target rate of return |
16% |
Corporate weighted average cost of capital |
13% |
Corporate effective tax rate |
45% |
What is the Lightbulb Division's capital turnover?
A. 3.4 | |
B. 4.5 | |
C. 16.7 | |
D. 4.9 |
2. A favorable direct labor efficiency variance might indicate that
A. higher skilled workers were used that performed the task faster than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. higher skilled workers were used that performed the task slower than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C. lower skilled workers were paid a higher wage than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
D. lower skilled workers were paid a lower wage than expected. 3. Mockingbird Company expects to sell 5,100 bird perches in January and 9,000 in February for $3 each. What will be the total sales revenue reflected in the sales budget for those months?
|
Capital Turnover Ratio = Division sales / Division total Assets
= $ 8,500,000 / $ 2,500,000
= 3.4
CORRECT ANSWER = Option ‘A’: 3.4
Direct labor efficiency variance = (Difference between Standard hours and Actual hours) x Standard rate.
It will be favourable when Actual hours will be LOWER than Standard hours. This will happen when workers with greater efficiency complete the task faster than expected.
CORRECT ANSWER = Option ‘A’: higher skilled workers were used that performed the task faster than expected.
Total Sales revenue for January = 5100
x $ 3 = $ 15,300
Total Sales revenue for February = 9000 x $ 3 = $ 27,000
CORRECT ANSWER = Option ‘C’: January $15,300; February $27,000
CORRECT ANSWER = Option ‘B’ Accounting Rate of Return.
Accounting rate of return = capital budgeting method, which uses the accrual rate of accounting rather than net cash flows.