Vanikord Corporation currently has two divisions which had the following operating results for last year:
|
|
Cork Division |
Rubber Division |
| Sales |
$500,000 |
$400,000 |
|
Variable costs
|
210,000
|
300,000
|
|
Contribution margin
|
290,000
|
100,000
|
|
Traceable fixed costs
|
130,000
|
70,000
|
|
Segment margin
|
160,000
|
30,000
|
|
Allocated common corporate fixed costs
|
90,000
|
50,000
|
|
Net operating income (loss)
|
$70,000
|
($20,000)
|
Because the Rubber Division sustained a loss, the president of Vanikoro is considering the elimination of this division. All of the division's traceable fixed costs could be avoided if the division was dropped. None of the allocated common corporate fixed costs could be avoided. If the Rubber Division was dropped at the beginning of last year, how much higher or lower would Vanikoro's total net operating income have been for the year?
A. $20,000 higher
B. $50,000 higher
C. $50,000 lower
D. $30,000 lower
Bullinger Corporation has provided the following data concerning an investment project that it is considering:
(Ignore income taxes in this problem.) Jason Corporation has invested in a machine that cost $80,000, that has a useful life of eight years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of five years. Given these data, the simple rate of return on the machine is closest to:
A. $93,000
B. $406,326
C. ($63,674)
D. ($79,658)
The best capital budgeting method for ranking investment projects of different dollar amounts is the: