Question
In: Accounting
a. Fragrance Pty Ltd has two (2) divisions: the Cologne Division and the Bottle Division. The...
a. Fragrance Pty Ltd has two (2) divisions: the Cologne Division and the Bottle Division. The company is de-centralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Cologne Division. The Bottle Division's variable manufacturing cost per unit is $2.00 and shipping costs are $0.10 per unit. The Bottle Division's external sales price is $3.00 per unit. No shipping costs are incurred on sales to the Cologne Division. The Cologne Division can purchase similar bottles in the external market for $2.50. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Cologne Division. Using the general rule, calculate the minimum transfer price from the Bottle Division to the Cologne Division. Explain your answer
b. For the period just ended, Trek Corporation's Trailer Division reported profit of $54 million and invested capital of $450 million. Assuming an imputed interest rate of 10 per cent, calculate Trailer’s return on investment (ROI) and residual income. Explain what each calculation of ROI and RI means for Trek. (
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Week 10 (Topic 9) (10 marks) a. Fragrance Pty Ltd has two (2) divisions: the Cologne...
Week 10 (Topic 9)
a. Fragrance Pty Ltd has two (2) divisions: the Cologne
Division and the Bottle Division. The company is de-centralised and
each division is evaluated as a profit centre.
The Bottle Division produces bottles that can be used by the
Cologne Division. The Bottle Division's variable manufacturing cost
per unit is $2.00 and shipping costs are $0.10 per unit. The Bottle
Division's external sales price is $3.00 per unit. No shipping
costs are incurred on sales to...
erfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised...
erfumes Ltd has two divisions: the Perfume Division and the
Bottle Division. The company is decentralised and each division is
evaluated as a profit centre. The Bottle Division produces bottles
that can be used by the Perfume Division. The Bottle Division's
variable manufacturing cost per unit is $3.00 and shipping costs
are $0.20 per unit. The Bottle Division's external sales price is
$4.00 per unit. No shipping costs are incurred on sales to the
Perfume Division. The Perfume Division can...
Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised...
Perfumes Ltd has two divisions: the Perfume Division and the
Bottle Division. The company is decentralised and each division is
evaluated as a profit centre. The Bottle Division produces bottles
that can be used by the Perfume Division. The Bottle Division's
variable manufacturing cost per unit is $3.00 and shipping costs
are $0.20 per unit. The Bottle Division's external sales price is
$4.00 per unit. No shipping costs are incurred on sales to the
Perfume Division. The Perfume Division can...
Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised...
Perfumes Ltd has two divisions: the Perfume Division and the
Bottle Division. The company is decentralised and each division is
evaluated as a profit centre. The Bottle Division produces bottles
that can be used by the Perfume Division. The Bottle Division's
variable manufacturing cost per unit is $3.00 and shipping costs
are $0.20 per unit. The Bottle Division's external sales price is
$4.00 per unit. No shipping costs are incurred on sales to the
Perfume Division. The Perfume Division can...
Alex Ltd, has two divisions, a Parts Division and Marketing Division. Each division operates as a...
Alex Ltd, has two divisions, a Parts Division and Marketing
Division. Each division operates as a profit centre.
The Parts Division manufactures keyboards and is free to sell its
product internally and externally. The Parts Division’s annual
capacity is 45,000 units and its fixed cost is $720,000. Currently,
sexternal sales represent 70% of the Parts Division’s production
capacity. The selling price for a keyboard is $60, and the variable
manufacturing cost is 60% of the selling price. Commissions is $...
SPD Ltd has two divisions, Tomato Division and Canning Division. Tomato Division has an annual capacity...
SPD Ltd has two divisions, Tomato Division and Canning Division.
Tomato Division has an annual capacity of 10 000 units of Tomato
paste concentrate. Canning Division's annual requirement of Tomato
paste concentrate is 8000 units. SPD Ltd requires that divisions
should purchase inputs internally where available and uses a
cost-plus transfer price policy, where transfer price is set at
variable cost plus 25 per cent. Therefore, Tomato Division always
satisfies the demand of the Canning Division first, before selling
the...
SPD Ltd has two divisions, Tomato Division and Canning Division. Tomato Division has an annual capacity...
SPD Ltd has two divisions, Tomato Division and Canning Division.
Tomato Division has an annual capacity of 10,000 units of tomato
paste concentrate. Canning Division's annual requirement of tomato
paste concentrate is 8,000 units. The variable production cost of
one unit of tomato paste concentrate at Tomato Division is $6, but
the division incurs $1 additional shipping cost per unit when
selling to external suppliers. The market price for the division's
tomato paste concentrate is $10 per unit, and currently,...
A multinational company has many divisions. Two of these divisions are Mic Division and Mandy Division....
A multinational company has many divisions. Two of these
divisions are Mic Division and Mandy Division. The Mic Division
produces a component that is used by the Mandy Division. The cost
of manufacturing the component is as follows:
Direct materials
$10
Direct labour
$6
Variable overhead
$4
Fixed overhead
$5*
Total cost
$25
*Based on a normal volume of 400,000 components
Other costs incurred by the Mic Division are as follows: Fixed
selling and administrative: $400,000
Variable selling: $1.50 per...
(a) Sher Manufacturing Pty Ltd has two retail divisions., which have the following reported results for...
(a) Sher Manufacturing Pty Ltd has two retail divisions., which
have the following reported
results for the year:
Furnishing
department
Dress
making Division
Profit $5,400,000
$9,270,000
Average invested Capital 11,250,000
10,687,500
(i) Calculate the ROI for both divisions
(ii) Calculate residual income assuming the firm requires a
return of 12% on invested capital (1
marks)
(iii) Which was the more successful division? Explain. (Hint:
think carefully about this)
(b) Giratina is a retailer and is a division of a larger...
) Sher Manufacturing Pty Ltd has two retail divisions., which have the following reported results for...
) Sher Manufacturing Pty Ltd has two retail divisions., which
have the following reported results for the year:
(i) Calculate the ROI for both divisions
(ii) Calculate residual income assuming the firm requires a
return of 18% on invested capital
(iii) Which was the more successful division? Explain. (Hint:
think carefully about this)
(b) Giratina is a retailer and is a division of a larger retail
company. The following data relate to the most recent year of
operations:
Furnishing department...
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