ch_12_HW - Exercise 12-1(10 minutes Total CD DVD Sales...

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Unformatted text preview: Exercise 12-1 (10 minutes) Total CD DVD Sales*................................................... $750,000 $300,000 $450,000 Variable expenses**.............................. 435,000 120,000 315,000 Contribution margin.............................. 315,000 180,000 135,000 Traceable fixed expenses..................... 183,000 138,000 45,000 Product line segment margin................ 132,000 $ 42,000 $ 90,000 Common fixed expenses not traceable to products......................................... 105,000 Net operating income............................ $ 27,000 * ** CD: 37,500 packs × $8.00 per pack = $300,000; DVD: 18,000 packs × $25.00 per pack= $450,000. CD: 37,500 packs × $3.20 per pack = $120,000; DVD: 18,000 packs × $17.50 per pack= $315,000. Exercise 12-2 (10 minutes) 1. Net operating income Margin = Sales $5,400,000 = = 30% $18,000,000 2. Sales Turnover = Average operating assets $18,000,000 = = 0.5 $36,000,000 3. ROI = Margin × Turnover = 30% × 0.5 = 15% Exercise 12-3 (10 minutes) Average operating assets (a).................. £2,200,000 Net operating income.............................. £400,000 Minimum required return: 16% × (a)....... 352,000 Residual income...................................... £ 48,000 Exercise 12-4 (20 minutes) 1. The lowest acceptable transfer price from the perspective of the selling division is given by the following formula: Total contribution margin on lost sales Variable cost Transfer price + per unit Number of units transferred  There is no idle capacity, so each of the 20,000 units transferred from Division X to Division Y reduces sales to outsiders by one unit. The contribution margin per unit on outside sales is $20 (= $50 – $30). $20 × 20,000 Transfer price ($30 - $2) + 20,000 = $28 + $20 = $48  The buying division, Division Y, can purchase a similar unit from an outside supplier for $47. Therefore, Division Y would be unwilling to pay more than $47 per unit.  Transfer price Cost of buying from outside supplier = $47 The requirements of the two divisions are incompatible and no transfer will take place. 2. In this case, Division X has enough idle capacity to satisfy Division Y’s demand. Therefore, there are no lost sales and the lowest acceptable price as far as the selling division is concerned is the variable cost of $20 per unit....
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ch_12_HW - Exercise 12-1(10 minutes Total CD DVD Sales...

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