Ch 12 Solutions to Assigned Homework

Ch 12 Solutions to Assigned Homework - Chapter 12 Solutions...

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Chapter 12 – Solutions to Assigned Homework Exercises Exercise 12–21 1. Average operating assets = $180,000 + $200,000 2 = $190,000 2. Margin = $22,800 $285,000 = 0.08 or 8% Turnover = $190,000 $285,000 = 1.5 3. ROI = Margin × Turnover = 0.08 × 1.5 = 0.12, or 12% Alternatively: ROI = assets operating Average income Operating = $190,000 $22,800 = 0.12, or 12% Exercise 12–22 1. Year 1 Year 2 Margin: 0 $12,500,00 $2,500,000 0.20, or 20% 0 $10,000,00 $1,800,000 0.18, or 18% Turnover $5,000,000 0 $12,500,00 2.5 $5,000,000 0 $10,000,00 2.0 2. ROI year 1 = 0.20 × 2.5 = 0.50, or 50% ROI year 2 = 0.18 × 2 = 0.36, or 36%
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Exercise 12–23 1. Residual income = $180,000 – (0.07 × $2,000,000) = $40,000 2. ROI must have been greater than 7 percent, because residual income is positive. Actual ROI = $2,000,000 $180,000 = 0.09, or 9% Exercise 12–27 1. The maximum transfer price is set by the buying division, in this case, the Motel Division. The minimum transfer price is set by the selling division, in this case, the Furniture Division. 2. Full cost transfer price = $29 3. The Motel Division would love to have a transfer price of $29 per dresser (remember, it is currently paying $40 per dresser). However, the Furniture Division will refuse to transfer at that price because it can sell all the dressers it can produce
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Ch 12 Solutions to Assigned Homework - Chapter 12 Solutions...

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