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Q1) Following information is provided for Alpha and Beta Divisions of Fraternity Corporation.

  Alpha Beta
Sales $600,000 $300,000
Var. cost of goods sold 200,000 150,000
Fixed manufacturing costs 50,000 40,000
Variable selling 30,000 5,000
Fixed admin. (50% allocated) 20,000 4,000
Fixed selling. (20% allocated) 50,000 30,000
Assets at cost 800,000 600,000
Accumulated depreciation 200,000 100,000

a. If Fraternity Corporation utilizes income to estimate division managers, find out net income that must be used for that purpose given limited data above.

b. If Fraternity Corporation uses ROI to estimate division managers, and utilizes historical cost as investment base, find out ROI for Alpha and Beta.

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  • Category:- Accounting Basics
  • Reference No.:- M919666

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