Question 1

Peppy Portraits specializes in pet photography and has both franchised and company-operated studios. Profit margin and investment turnover for both segments are as follows:  Peppy Portraits is expanding. Based on the return on investment (ROI), would you advise a new location to be a company-operated or franchised studio?

Accepted Answer

The answer of Peppy Portraits specializes in pet photography and...

Question 2

Materials used by Best Bread Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.
a.If a transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's current sales, how much would Best Bread Company's total operating income increase?
b.Assuming a transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's current sales, how much would the operating income of Division A increase?
c.Assuming a transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's current sales, how much would the operating income of Division B increase?
d.If the negotiated price approach is used, what would be the range of acceptable transfer prices?

Accepted Answer

The answer of Materials used by Best Bread Company in...

Question 3

Paduka Industries has several divisions. The Eastern Division has $350,000 of invested assets, operating income of $200,000, and residual income of $151,000. Determine the minimum acceptable return on investment.

Accepted Answer

The answer of Paduka Industries has several divisions. The Eastern...

Question 4

Division G of Elephant Preservation Inc. has sales of $895,000, cost of goods sold of $475,000, operating expenses of $79,500, and invested assets of $750,000. Round percentages to one decimal place and investment turnover to two decimal places.​
Compute:
a. The return on investment for Division G.
b. The profit margin for Division G.
c. The investment turnover for Division G.

Accepted Answer

The answer of Division G of Elephant Preservation Inc. has...

Question 5

Materials used by Layton Company's Division 1 are currently purchased from outside supplier at $58 per unit. Division 2 is able to supply Division 1 with 20,000 units at a variable cost of $46 per unit. The two divisions have recently negotiated a transfer price of $50 per unit for the 20,000 units.​
a. By how much will each division's income increase as a result of this transfer?
b. What is the total increase in income for Layton Company?

Accepted Answer

The answer of Materials used by Layton Company's Division 1...

Question 6

The materials used by Hibiscus Company's Division A are currently purchased from an outside supplier at $55 per unit. Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 20,000 units.
a. By how much will each division's income increase as a result of this transfer?
b. What is the total increase in income for Hibiscus Company?

Accepted Answer

The answer of The materials used by Hibiscus Company's Division...

Question 7

The sales, operating income, invested assets, and residual income for each division of Marcus Company are as follows:  Determine the minimum return on invested assets

Accepted Answer

The answer of The sales, operating income, invested assets, and...

Question 8

Bottlebrush Company has operating income of $60,000, invested assets of $345,000, and sales of $786,000. Use the DuPont formula to compute the return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) the return on investment. Round the profit margin percentage and the return on investment to two decimal places and the investment turnover to three decimal places.

Accepted Answer

The answer of Bottlebrush Company has operating income of $60,000,...

Question 9

The materials used by Holly Company's Division A are currently purchased from an outside supplier. Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. Division B normally sells its units for $53 per unit. What is the range of transfer prices within which the two division managers should negotiate?

Accepted Answer

The answer of The materials used by Holly Company's Division...

Question 10

Miller's Quarter Horse Company has sales of $4,500,000. It also has invested assets of $2,500,000 and operating expenses of $3,800,000. The company has established a minimum return of 7%. Round percentages and investment turnover to one decimal place.
a. What is Miller's profit margin?
b. What is the investment turnover?
c. What is the rate of return on investment?
d. What is Miller's residual income?

Accepted Answer

The answer of Miller's Quarter Horse Company has sales of...

Quiz 24: Evaluating Decentralized Operations

Paduka Industries has several divisions. The Eastern Division has $350,000 of invested assets, operating income of $200,000, and residual income of $151,000. Determine the minimum acceptable return on investment.

The sales, operating income, invested assets, and residual income for each division of Marcus Company are as follows: Determine the minimum return on invested assets