Hardcastle Ltd

question 94

Multiple Choice

Hardcastle Ltd.had sales of $3 000 000 and net operating income of $800 000.Operating assets during the year averaged $1 500 000.The manager of Hardcastle is considering the purchase of a new machine which is expected to increase average operating assets by 5 per cent.If the new machine is purchased,the company's new return on investment (ROI) would be:

• A) 190.5 per cent
• B) 52.5 per cent
• C) 196.9 per cent
• D) 50.8 per cent

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Definitions:

Monthly Depreciation

The allocation of an asset's cost over its useful life on a monthly basis, reflecting its consumption or wear and tear.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, helping manage liquidity and cash reserves.

Direct Labor Budget

An estimate of the total amount of labor cost that will be needed to produce the products a company plans to manufacture in a specific period.

Variable Manufacturing Overhead

Indirect manufacturing costs that fluctuate with production volume, such as utility costs for running production equipment.