Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 11,000 speakers per year. It has received a quote of $37 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume that the Audio Division is now selling only 45,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 11,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

2. Assume that the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 11,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $57 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume the Audio Division is now selling only 20,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 10,000 speakers per year. It has received a quote of $38 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume the Audio Division is now selling only 53,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 9,000 speakers per year. It has received a quote of $33 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume the Audio Division is now selling only 48,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 10,000 speakers per year. It has received a quote of $37 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume the Audio Division is now selling only 47,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 10,000 speakers per year. It has received a quote of $29 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume the Audio Division is now selling only 47,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

Case (a) A Cement manufacturing organization incurred the following expenses during the year 2017.The establishment cost for a new business facility was amounted to OMR 45,000, the cost of formulas and prototype was OMR 76,000, The design of pilot plan was OMR 172,000, The television advertisement cost was OMR 25,000, Goodwill acquired from purchase combination was OMR 65,000, Operating rights cost was 36,000 During the year, in house accounting software was developed by the organization at a cost of OMR 120,000.

Case (b) A new product was developed during the year. The expenditure totaled OMR 4.5 million of which OMR 3 million was incurred prior to 30 November 2018 and on that date it became clear that the product was technically viable. The new product will be launched in the next four months and its recoverable amount is estimated at OMR 2,100,000.

Case (c) A customer list was prepared by marketing division and through that innovative marketing strategies have been developed. The estimated cost of preparation of customer list was OMR 900,000 out of which the actual cost incurred for this purpose was OMR 650,000. Because of this cost the company has earned incremental revenue of OMR 450,000.

Case (d) The Company has acquired a formula from an organization for production of one variety of products. The cost incurred on acquiring the formula was OMR 200,000. The new product with the formula was popularized and the increased profit to the business over the next two years would be OMR 325,000

Required:

On the role of an accountant, assess ALL the above cases and justify your answer for ALL the cases about the capitalization of assets and charging of expenses as per the requirement so IAS 38

Case (a) A Cement manufacturing organization incurred the following expenses during the year 2017.The establishment cost for a new business facility was amounted to OMR 45,000, the cost of formulas and prototype was OMR 76,000, The design of pilot plan was OMR 172,000, The television advertisement cost was OMR 25,000, Goodwill acquired from purchase combination was OMR 65,000, Operating rights cost was 36,000 During the year, in house accounting software was developed by the organization at a cost of OMR 120,000.

Case (b) A new product was developed during the year. The expenditure totaled OMR 4.5 million of which OMR 3 million was incurred prior to 30 November 2018 and on that date it became clear that the product was technically viable. The new product will be launched in the next four months and its recoverable amount is estimated at OMR 2,100,000.

Case (c) A customer list was prepared by marketing division and through that innovative marketing strategies have been developed. The estimated cost of preparation of customer list was OMR 900,000 out of which the actual cost incurred for this purpose was OMR 650,000. Because of this cost the company has earned incremental revenue of OMR 450,000.

Case (d) The Company has acquired a formula from an organization for production of one variety of products. The cost incurred on acquiring the formula was OMR 200,000. The new product with the formula was popularized and the increased profit to the business over the next two years would be OMR 325,000

Required:

On the role of an accountant, assess ALL the above cases and justify your answer for ALL the cases about the capitalization of assets and charging of expenses as per the requirement so IAS 38

1. Assume that annual interest rates in the U.S. are 3 percent, while interest rates in Japan are 6 percent. Assume that the current spot rate is ¥100/$.

Suppose the U.S. risk-free interest rate has been steadily rising from 2% 3 years ago to 5% currently. The Euro interest rate has remained constant over the same time period at 6%, what should be happening to the Euro’s forward premium/discount?

What is the impact of an appreciation of the USD on

    U.S. exports

    U.S. imports

    The dollar value of U.S. investments in the foreign country (and denominated in the foreign currency)

    The foreign currency value of foreign investments in the U.S. (and denominated in dollars)

Answer all of the above with a simple ↑ or ↓

2. Suppose there is a large increase in the income level in Mexico and a much smaller increase in the U.S. income level. Everything else equal, what is likely to happen to value of the MXN?

3. The INR appreciates 4% versus the USD. The EUR depreciates 10% versus the USD. What’s the approximate appreciation or depreciation we might see in the EUR/INR exchange rate?

4. Based on interest rate parity, the larger the degree by which the U.S. interest rate exceeds the foreign interest rate, then?

5. If the spot rate is C$1.12/$ and the forward rate is C$1.02/$, which currency exhibits a forward discount?

6. Bank believes the New Zealand dollar will appreciate over the next 6 months from $.41/NZ$ to $.43/NZ$. The following 6-month interest rates apply: (the rates are periodic rates so you do not need to adjust them at all – we do not need to multiply by 180/360 or anything like that)

       Currency                    Lending Rate               Borrowing Rate

       Dollars    3.5% 4.25%

       New Zealand dollar (NZ$)    2.6% 3.05%

Bank has the capacity to borrow either NZ$10 million or $5 million. If Bank’s forecast if correct, what will its U.S. dollar profit be from speculation over the 6-month period?

7. Interest rates are 6.5% in the U.S. and 4% in Canada. Jacque carry trader borrows C$10,000,000 to execute a carry trade. At the start, the exchange rate is C$1.1325/$. After one year, the exchange rate is C$1.1175/$.

8. If the C$ had not appreciated or depreciated over the year (stayed at C$1.1325/$) verify that Jacque would have made C$250,000. What’s special about C$250,000? You’ll see if you take the interest rate differential and multiply that percentage profit by the amount of Canadian dollars Jacque borrowed.

9. A U.S. firm with net cash inflows denominated in euros could partially offset this exposure by issuing bonds denominated in euros. T/F

10. Assume that the U.S. and Japan nominal interest rates are equal. Then, the U.S. nominal interest rate decreases while the Japan nominal interest rate stable. According to the international Fisher effect, this implies expectations of ____ than before, and that the Japan yen should ____ over time against the dollar.