195.Miller's Quarter Horse Company has sales of $4,500,000. It also has invested assets of $2,500,000 and operatingexpenses of $3,800,000. The company has established a minimum rate of return of 7%.
(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?
196.Division G of Elephant Preservation Inc. has sales of $895,000, cost of goods sold of $475,000, operating expensesof $79,500, and invested assets of $750,000.
Calculate:
(a)The rate of return on investment for Division G.
(b)The profit margin for Division G.
(c)The investment turnover for Division G.
197.The sales, income from operations, invested assets, and residual income for each division of Marcus Company areas follows:
|
?
?
?
?
Sales
|
?
?
Income from
Operations
|
?
?
?
Invested
Assets
|
?
?
?
Residual Income
|
Division X
|
$5,000,000
|
$645,000
|
$4,100,000
|
$235,000
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Division Y
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6,800,000
|
777,000
|
4,000,000
|
377,000
|
Division Z
|
3,750,000
|
760,000
|
7,600,000
|
0
|
Determine the minimum rate of return for invested assets.
198.Materials used by Best Bread Company in producing Division A’s product are currently purchased from outsidesuppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division B hasunused 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’stotal income from operations increase?
(b)Assuming transfer price of $25 per unit is established and 60,000 units of material aretransferred, with no reductions in Division B’s current sales, how much would the incomefrom operations of Division A increase?
(c)Assuming transfer price of $25 per unit is established and 60,000 units of material aretransferred, with no reductions in Division B’s current sales, how much would the incomefrom operations of Division B increase?
(d)If the negotiated price approach is used, what would be the range of acceptable transferprices?