Student Name: _________________________________________Foster School of Business Student Code of Conduct:By signing below you acknowledge that you are a part of a learningcommunity at the Foster School of Business that is committed to theacademic standards of honesty, respect, and integrity, and that you willadhere to these standards while completing this quiz._____________________________Student SignatureQuiz Section: 1:30 2:301ACCTG 225Quiz 5A – Chapters 6 (Class 2) 11, & 12 (Class 1) – March 6, 2013Student Name: _________________________________________ Score: _______/15You have 25 minutes to complete this quiz. Show ALL work on these pages, credit may not be given for correct answers with no support. Attempt all questions.TRUE/FALSE (0.5 points each) T / FMULTIPLE CHOICE (1 point each)1. Residual income is a better measure for performance evaluation of an investment center manager than return on investment because: A. the problems associated with measuring the asset base are eliminated.B. desirable investment decisions will not be rejected by divisions that already have a high ROI.C. only the gross book value of assets needs to be calculated.D. returns do not increase as assets are depreciated.2. A common cost that should not be assigned to a particular product on a segmented income statement is: A. the product's advertising costs.B. direct materials costs.C. the salary of the corporation president. D. the product manager's salary.21. Residual income equals average operating assets multiplied by the difference between thereturn on investment and the minimum required rate of return.T2. Consider a company that has only variable costs. All other things the same, an increase in unit sales will result in no change in the return on investment. F3. The contribution margin is viewed as a better gauge of the long run profitability of a segment than the segment margin. F4. Fixed costs that are traceable to a segment may become common if the segment is divided into smaller units. TCOMPUTATIONAL PROBLEMS3. The Foster Division reports the following operating data for the past two years. The return on investment at Foster was exactly the same in Year 1 and Year 2. Please fill in the question marks. (1 point each; 6 total)34. The Gasson Company sells three products, Product A, Product B and Product C, and had sales of $1,000,000 during the month of June. The company's overall contribution margin ratio was 37% and fixed expenses totaled $350,000. Sales were: Product A, $500,000; Product B, $300,000; and Product C, $200,000. Traceable fixed costs were: Product A, $120,000; Product B, $100,000; and Product C, $60,000. The variable expenses of Product A were $300,000 and the variable expenses of Product B were $180,000. a. Net operating income for the company was (1 point):Total contribution margin = Overall CM ratio  Total sales = 0.37  $1,000,000 = $370,000Net operating income = Total contribution margin - Total fixed expenses = $370,000 - $350,000 = $20,000b. The contribution margin ratio for Product C was (2 points):Product C contribution margin = $200,000 - $150,000 = $50,000Product C CM ratio = Product C contribution margin  Product C sales = $50,000  $200,000 = 0.25c. The common fixed expense for Gasson Company for the month of June was (1 point):4Total traceable fixed expenses = $120,000 + $100,000 + $60,000 = $280,000Common fixed expenses = Total fixed expenses - Total traceable fixed expenses= $350,000 - $280,000 = $70,000d. The product line segment margin for Product A for June was (1 point):55. The Western Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows (3 points): If the new product is added to the existing product line, then sales of existing products will decline. As a consequence, the contribution margin of the other existing product lines is expected to drop $78,000 per year. 6a. If the new product is added next year, the increase in net operating income resulting from this decision would be: (1 point)b. What is the lowest selling price per product that could be charged for the new product and still make it economically desirable to add the new product? (2 points)The selling price would have to cover the total cost of $744,000. On a per unit basis, this would be $744,000  3,000 units = $248 per