nese market f- The Tokyo get:

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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Answer the last question No.3

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9.24
market for P6,000 each. The following data are from the Tokyo Division's 2018
The Tokyo Division of Toy King manufactures "Togo Toy" and sells them in the
market for P6,000 each. The following data are from the Tokyo Division's 2018
Japanese n
hudget:
Variable cost
Fixed overhead
Total assets
P3,800 per unit
P6,080,000
P12,500,000
Toy King has instructed the Tokyo Division to budget a rate of return on total assets
before taxes) of 20%.
1 Suppose the Tokyo Division expects to sell 3,400 units during 2018:
What rate of return will be earned on total assets?
b. What would be the expected capital turnover?
What would be the operating income percentage of sales?
2. The Tokyo Division is considering adjustments in the budget to reach the desired 20%
C.
rate of return on total assets:
a. How many units must be sold to obtain the desired return if no other part of the
budget is changed?
b. Suppose sales cannot be increased beyond 3,400 units. How much must total
assets be reduced to obtain the desired return? Assume that for every P1,000
decrease in total assets, fixed costs decrease by P100.
3. Assume that only 2,400 units can be sold in the Japanese market. However, another
1,400 units can be sold to the American Marketing Division of Toy King. The Tokyo
manager has offered to sell the 1,400 units for P5,500 each. The American Marketing
Division manager has countered with an offer to pay P5,000 per unit, claiming that she
can subcontract production to an American producer at a cost equivalent to P5,000. The
Transcribed Image Text:9.24 market for P6,000 each. The following data are from the Tokyo Division's 2018 The Tokyo Division of Toy King manufactures "Togo Toy" and sells them in the market for P6,000 each. The following data are from the Tokyo Division's 2018 Japanese n hudget: Variable cost Fixed overhead Total assets P3,800 per unit P6,080,000 P12,500,000 Toy King has instructed the Tokyo Division to budget a rate of return on total assets before taxes) of 20%. 1 Suppose the Tokyo Division expects to sell 3,400 units during 2018: What rate of return will be earned on total assets? b. What would be the expected capital turnover? What would be the operating income percentage of sales? 2. The Tokyo Division is considering adjustments in the budget to reach the desired 20% C. rate of return on total assets: a. How many units must be sold to obtain the desired return if no other part of the budget is changed? b. Suppose sales cannot be increased beyond 3,400 units. How much must total assets be reduced to obtain the desired return? Assume that for every P1,000 decrease in total assets, fixed costs decrease by P100. 3. Assume that only 2,400 units can be sold in the Japanese market. However, another 1,400 units can be sold to the American Marketing Division of Toy King. The Tokyo manager has offered to sell the 1,400 units for P5,500 each. The American Marketing Division manager has countered with an offer to pay P5,000 per unit, claiming that she can subcontract production to an American producer at a cost equivalent to P5,000. The
Tokyo manager knows that if his production falls to 2,400 units he could eliminate s
assets, reducing total assets to P10 million and annual fixed overhead to P4.9 million.
Should the Tokyo manager sell for P5,000 per unit? Support your answer with
some
Should the Tokyo manager sell for P5,000 per unit? Support your answer
the relevant computations. Ignore the effects of income taxes and import duties
Transcribed Image Text:Tokyo manager knows that if his production falls to 2,400 units he could eliminate s assets, reducing total assets to P10 million and annual fixed overhead to P4.9 million. Should the Tokyo manager sell for P5,000 per unit? Support your answer with some Should the Tokyo manager sell for P5,000 per unit? Support your answer the relevant computations. Ignore the effects of income taxes and import duties
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