Fixed assets= 5,00,000Current assets (other than debtors) 3,00,000Debtors =2,00,000Annual fixed cost of the division= 8,00,000Variable cost per unit of product 10Budgeted volume of production per year (units)= 4,00,000Desired return on investment 28%You are required to determine the transfer price for the division A.Falcon co fixes the inter-divisional transfer prices for its products on the basis of cost plus andestimated return on investment in its division. The details given above was related toDivision Afor the year 2019-20.

Transfer pricing is the method which was adopted by a division to charge the price for supply of…

Answered: Fixed assets= 5,00,000 Current assets…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 27E: Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the...

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Residual income The Commercial Division of Galena Company has operating income of 12,680,000 and assets of 74,500,000. The minimum acceptable return on assets is 12%. What is the residual income for the division?
Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year: At the beginning of last year, Elway had 28,300,000 in operating assets. At the end of the year, Elway had 23,700,000 in operating assets. Required: 1. Compute average operating assets. 2. Compute the margin and turnover ratios for last year. (Note: Round the answer for margin ratio to two decimal places.) 3. Compute ROI. (Note: Round answer to two decimal places.) 4. CONCEPTUAL CONNECTION Briefly explain the meaning of ROI. 5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company).
Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last years results: Washingtons actual cost of capital was 12%. Exercise 11-32 Residual Income Refer to the information for Washington Company above. In addition, Washington Companys top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.
XYZ Company has two divisions, A and B. Information for each division is as follows: A B Net earnings for division P 40,000 P 260,000 Asset base for division P100,000 P1,200,000 Target rate of return 15% 18% Margin 10% 20% Weighted average cost of capital 12% 12% What is the operating asset turnover for A? 0.15 0.10 4.00 2.50 Group of answer choices 1 2 3 4
Selected data from Division A of Green Company are as follows: Sales $ 490,000 Average investment $ 416,500 Operating income $ 83,300 Minimum rate of return 16 % Division A's asset turnover (AT) is (rounded to two decimal places):
Spartans Inc. has the following information for its two divisions: North and South North South Sales $6,000,000 $6,000,000 Expenses $3,800,000 $3,800,000 Oper. Income $2,200,000 $2,200,000 Taxes $660,000 $770,000 Taxable Inc. $1,540,000 $1,430,000 Invested Assets $13,000,000 $15,000,000 Spartans Inc. has a 10% hurdle rate. Calculate the following for each division: Return on Investment (ROI) North Division ________________ South…
INVESTMENT CENTER: The AAA Division has permanent current assets of P50,000 and operating non-current assets of 350,000. It provides annual operating income after tax of P100,000. Its cost of capital is 15% but the minimum required rate of return by the entity is 16%. How much is its current return on investment? How much is its economic value added? How much is its residual income? Assume that the Senna Division is presented by the head office to manage a P60,000 investment option yielding a 20% return on its investment. Should the Division agree to manage this investment opportunity? Yes, because the ROI will increase. Yes, because the RI and EVA will increase. No, because the ROI will decrease. No, because the RI and EVA will decrease.
The following information relates to the Quilt Division of TDS Corporation for last year:Sales $200,000Net operating income $60,000Average operating assets $500,000Minimum required rate of return 10%The divisions residual income is closest to? 50,000 10,000 140,000 40,000
The following are selected data for the division for the consumer products of ABC Corp for 2020: Sales P 10,000,000 Average invested capital 4,000,000 Net Income 400,000 Cost of Capital 8% What is the asset turn-over ratio for the division? .25 times 2.5 times 8 times 10% Group of answer choices 1 2 3 4
XYZ Company has two divisions, A and B. Information for each division is as follows: A B Net earnings for division P 40,000 P 260,000 Asset base for division P100,000 P1,200,000 Target rate of return 15% 18% Margin 10% 20% Weighted average cost of capital 12% 12% What is the total sales amount for B? P666,667 P800,000 P1,300,000 P1,200,000 Group of answer choices 1 2 3 4
DATA FOR TOWER HILL DIVISION Revenue 10, 000Fixed Asset:Purchases by division 500Purchases by Head Office 2,500Direct Material and Labour Costs (variable) 6,000Indirect Labour (Consolidate fixed overhead) 1000Divisional Manager’s Salary 400Apportioned Head Office Costs 600Depreciation on fixed assets 20%Company’s cost of capital 10%Assuming that fixed assets comprise the total investment in Tower Hill Division. You are required to determine the following:(i). Variables(ii). Controllable profit (iii). Direct profit (iv). Controllable residual profit (v). Net residual profit
The sales, income from operations, and invested assets for each division of Wren Company are as follows: 　　 Sales Income from Operations Invested Assets Division C $5,000,000 $630,000 $4,000,000 Division D 6,800,000 760,000 3,900,000 Division E 3,750,000 750,000 7,500,000 Management has established a minimum rate of return for invested assets of 10%. What is the Residual Income for Division C? What is the Residual Income for Division D? What is the Residual Income for Division E? Based on Residual Income, Division __?__ is the most profitable.

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