Managerial Accounting Course Workbook Assignments Must Be Submitted as Indicated Problem 3 Problem 1 The management accountant for Tony's Skateboard...
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Managerial Accounting Course Workbook Assignments Must Be Submitted as Indicated Problem 3 Problem 1 Jammer Cruise Flight Total Sales $400,000 $250,000 $350,000 $1,000,000 Current Results for each Division are as follows: Variable expenses 260,000 150,000 190,000 600,000 Total Assets Income Contribu±on margin 140,000 100,000 160,000 400,000 Candles $1,000,000 $160,000 Other costs 20,000 30,000 20,000 70,000 CraFs $1,500,000 $190,000 Segment margin 120,000 70,000 140,000 330,000 Clothes $1,300,000 $220,000 Allocated avoidable costs 30,000 30,000 20,000 80,000 Jewelry $1,200,000 $180,000 Segment income 90,000 40,000 120,000 250,000 Allocated corporate costs 50,000 50,000 50,000 150,000 Bonuses are based upon ROI increase. Corporate pro²t $40,000 ($10,000) $70,000 $100,000 If ROI decrease, no bonus is earned. Required: Compute the ROI & RI for each division. a. Do you recommend dropping the Cruise product line? Why or why not? ROI Residual Income Candles b. If the Jammer product line had been discon±nued, the short-term e³ect on corporate pro²ts would be a decrease of what amount? CraFs Clothes c. Assume that the ´light product line has been discon±nued and long-term capacity has had ±me to adjust. The projected long-term e³ect of this ac±on on annual corporate pro²ts would be a decrease of what amount? Jewelry Bachman as a Whole d. Assume that an adver±sing campaign could increase revenues for any of the products by $15,000. To maximize corporate pro²ts, which product line should receive the adver±sing dollars? Why? e. How would you change the format of the segment margin statement above to make it more understandable? What is new ROI for the Jewelry department if they make the investment What is new ROI for the Bachman if the Jewelry department makes the investment? ´rom a purely ²nancial perspec±ve, is this a good investment for Bachman? Will the Jewelry Division manager make the investment? Why or Why not? What is wrong here – why is can’t we get the Jewelry manager to do what is in the best interest of the company as a whole? Problem 2 Direct materials ### Direct labor ### Variable overhead ### Division ²xed costs ### Direct materials ### Direct labor ### Variable overhead ### Division ²xed costs ### Sole Assembly You are a consultant for the Bachman Company. The Company currently has an ROI of 15% - and the cost of capital 10%. The Company has 4 Divisions: The Candles, CraFs, Clothes and Jewelry The management accountant for Tony's Skateboard Company has prepared the following segmented income statement for each of its three product lines. An opportunity comes along for the Jewelry Division to purchase a small pendant company. The purchase will require an investment of $250,000 and will increase income by $27,000. Concerns are raised about Transfer Pricing Issues at the Toby Shoe Company which manufacturers only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers at a cost of $50 per shoe (shoes are not sold in pairs - that would make the problem too complicated.) The Sole Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $20. (Ignore changes in inventory.) The ²xed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units. The ²xed costs for the Assembly Division are assumed to be $7 per pair at 100,000 units. Sole's costs per pair of soles are : Assembly's costs per completed pair of shoes are : · What is the market-based transfer price per pair of soles from the Sole Division to the Assembly Division? · What is the transfer price per pair of soles from the Sole Division to the Assembly Division if the method used to place a value on each pair of soles is 180% of variable costs · What is the transfer price per pair of shoes from the Sole Division to the Assembly Division per pair of soles if the transfer price per pair of soles is 125% of full costs? · Calculate and compare the di³erence in overall corporate net income between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $60 per pair to customers. o Scenario A: Nego±ated transfer price of $15 per pair of soles o Scenario B: Market-based transfer price · Assume the transfer price for a pair of soles is 180% of total costs of the Sole Division and 40,000 of soles are produced and transferred to the Assembly Division. What is the opera±ng income for The Sole Division and the opera±ng income for the Assembly division? · If the Assembly Division sells 100,000 pairs of shoes at a price of $60 a pair to customers, what is the opera±ng income of each division? · Now assume the Sole Division is a country with a 30% average tax rate and the Assembly Division is a tax bracket with a 70% average tax rate. Determine the op±mum transfer pricing remember the ceiling and µoor.
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Supplememental problems wk 7.xlsx

Managerial Accounting
Course Workbook
Assignments Must Be Submitted as Indicated Problem 3
Problem 1
The management accountant for Tony's Skateboard Company has prepared the following segmented...

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