Question : 31.The Cineplex Movie Theater has invested in a snack bar : 1257210

 

 

31.The Cineplex Movie Theater has invested in a snack bar for its store, where individual pizzas would be prepared and sold. The investment cost the company $45,000. The company expects a sales volume for the new product to be 12,000 pizzas a year. Variable materials, preparation, and marketing costs are expected to be $1.50 per unit and fixed costs are estimated at $15,000 a year. Based on a desired 12% ROI, what should Cineplex charge as the selling price per pizza?   

A. $3.00

 

B. $2.75

 

C. $5.20

 

D. $3.20

 

 

32.Ormand Organic Grocery has invested in a yogurt stand for its store. The investment cost the company $100,000. Variable materials, preparation, and marketing costs are expected to be $.60 per unit and fixed costs are estimated at $6,000 a year. If actual sales were 20,000 servings, what would the ROI be using the sales price of $1.80?   

A. 30.0%

 

B. 22.0%

 

C. 18.0%

 

D. 24.0%

 

 

33.Howard Company provided the following selected information about its consumer products division for 2014:  Based on this information, the division’s investment amount was:   

A. $250,000.

 

B. $1,000,000.

 

C. $1,500,000.

 

D. $1,250,000.

 

 

34.Fairpoint Products provided the following selected information about its consumer products division for 2014:  Based on this information, the division’s investment amount was:   

A. $500,000.

 

B. $1,250,000.

 

C. $750,000.

 

D. $2,000,000.

 

 

35.Payne Company reported the following information for 2014:  The company’s residual income for 2014 was:   

A. $(15,000).

 

B. $14,000.

 

C. $15,000.

 

D. $24,000.

 

 

36.Joseph Company reported the following information for 2014:  The company’s operating income for 2014 was:   

A. $94,440.

 

B. $56,250.

 

C. $45,000.

 

D. $33,750.

 

 

37.Which of the following would increase residual income? (Assume all other things are equal)   

A. Decrease in investment

 

B. Decrease in operating income

 

C. Increase in the desired return on investment

 

D. None of these.

 

 

38.To avoid suboptimization, many companies prefer to evaluate their investment centers using:   

A. Residual income instead of return on investment.

 

B. Return on investment instead of residual income.

 

C. Gross margin instead of contribution margin.

 

D. Sales instead of income.

 

 

39.When using residual income (RI) as a project-screening tool, management should accept a project if:   

A. RI is positive.

 

B. RI is negative.

 

C. RI equals ROI.

 

D. RI is greater than Net Income.

 

 

40.Brookings Company evaluates its managers on the basis of return on investment. Division Three has a return on investment (ROI) of 15% while the company as a whole has an ROI of only 10%. Which of the following performance measures will motivate the manager of Division Three to accept a project earning a 12% return?   

A. ROI

 

B. Residual income (RI)

 

C. Both ROI and RI will motivate the manager to accept the project.

 

D. Neither ROI nor RI will motivate the manager to accept the project.

 

 

 

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