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Problem 1
| Required: Identify each of the following as either a direct or indirect cost. | |
| (20 points) | |
| Direct or Indirect? | |
| Material used in production | |
| Salary of manufacturing supervisor | |
| Wages of manufacturing worker | |
| Telephone costs | |
| Rent |
Problem 2
| Required: GH Company is trying to decide whether to replace a current piece of machinery with a new machine. Using the below data, determine the relevant costs of the old machine and the new machine. Should GH Company purchase the new machine? | ||||
| (30 points) | ||||
| Old Machine | New machine | |||
| Original cost | 100,000 | |||
| Accumulated depreciation | ( | 50,000 | ||
| Book value | ||||
| Market value (now) | 2 | 5,000 | 30,000 | |
| Salvage value (in 5 years) | 8,000 | |||
| Annual depreciation expense | 11,000 | |||
| Operating expenses | ||||
| Per year | 9,000 | 4 | ||
| Times number of years | ||||
| Total operating expenses | 36,000 | 18,000 |
Problem 1
| Required: In the space below, describe the advantages of budgeting. |
| (10 points) |
Problem 2
| Required: Compute the ROI for each division below to two decimal places. (30 points) Which division has the best performance? (10 points) |
|||
| (40 points total) | |||
| Division A | Division B | Division C | |
| Operating income | 245,000 | 125,000 | 350,000 |
| Operating assets | 1,200,000 | 775,000 | 1,500,000 |
