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Problem 1 Chicago Company has the following infor...

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Problem 1 Chicago Company has the following information pertaining to its Brick division for this year: Bricks Fixed manufacturing expenses $ 70,000 Fixed selling and administrative expenses 60,000 Sales 500,000 Direct manufacturing costs (variable) 80,000 Variable selling and administrative expenses 140,000 Corporate expenses allocated to the brick division are $48,000. Calculate the brick division?s division margin. Problem 2 Ruby Division had the following information: Current Liabilities $ 3,600,000 Investment base 30,000,000 Net operating income before taxes 4,000,000 Tax rate 35% Cost of capital 10% Calculate Ruby Division's economic value added. Problem 3 The Chip Division of Circuit Co has just revised its actual cost data for the year just ended. Chip Division transfers circuit boards to the Assembly Division, and incurs no selling expense for such transfers. Assembly Division can buy the same goods in the open market for $132 each. Chip's new cost data are: Direct materials $ 60 Direct labor 30 Variable manufacturing overhead 10 Fixed manufacturing overhead 8 Variable selling expenses 6 Fixed selling and administrative expenses 12 Total costs $126 Desired return 20 Sales price $146 Current production is 400,000 units, and Chip has a capacity of 600,000 units. Required: a. What is the lowest price Chip should charge for the internal transfer of its goods? b. What is the highest price Assembly should pay Chip for the units? c. Give the primary reason why Chip should reduce its price for internal transfers below the market price. Problem 4 Hinsdale Company has the following data for this year: Bottling Division Mixing Division Average operating assets $320,000 $ 800,000 Contribution margin 160,000 500,000 Operating income 80,000 120,000 Sales 400,000 1,200,000 Weighted-average cost of capital 18% 18% Hinsdale Company has a target ROI of 18 percent. Required: Calculate the following amounts for each division: a. Return on sales ratio b. Operating investment turnover c. ROI d. Residual income

 

Paper#3426 | Written in 18-Jul-2015

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