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Sales Operating Income Operating Assets Return on Investment Required rate of return Residual Income Production Variable Costs Fixed Overhead Division A $60.000 4.500 30,000 15% 10% 1.500 Market Price Variable Cost ‒‒‒‒‒‒‒ Division A manufactures batteries that it sells primarily to Division B. Half the batteries manufactured by Division A were sold to outside companies at a price of $2 each. The remaining batteries were transferred to Division B. The cost data are given below. Variable Selling Expenses Fixed Administrative Expenses What should the transfer price be if the company uses: Division B $75,000 25.000 250.000 10% 8% 5,000 120,000 units $120,000 $60,000 $30,000 $20,000 Division C $100.000 10.000 $50,000 20% 20% 0

Sales Operating Income Operating Assets Return on Investment Required rate of return Residual Income Production Variable Costs Fixed Overhead Division A $60.000 4.500 30,000 15% 10% 1.500 Market Price Variable Cost ‒‒‒‒‒‒‒ Division A manufactures batteries that it sells primarily to Division B. Half the batteries manufactured by Division A were sold to outside companies at a price of $2 each. The remaining batteries were transferred to Division B. The cost data are given below. Variable Selling Expenses Fixed Administrative Expenses What should the transfer price be if the company uses: Division B $75,000 25.000 250.000 10% 8% 5,000 120,000 units $120,000 $60,000 $30,000 $20,000 Division C $100.000 10.000 $50,000 20% 20% 0

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sales Operating Income Operating Assets Return on Investment Required rate of return Residual Income Production Variable Costs Fixed Overhead Division A $60.000 4.500 30,000 15% 10% 1.500 Division A manufactures batteries that it sells primarily to Division B. Half the batteries manufactured by Division A were sold to outside companies at a price of $2 each. The remaining batteries were transferred to Division B. The cost data are given below. Variable Selling Expenses Fixed Administrative Expenses What should the transfer price be if the company uses: Sales Operating Income Operating Assets Minimum rate of returi 10% Division B $75,000 25.000 Market Price Variable Cost Consider the following data for three divisions of a conglomerate: Division A Division B Division C $140,000 $180,000 $250,000 5,000 63,000 14,400 20,000 35,000 90,000 19% 20% ABC 250.000 10% 8% 5,000 120,000 units $120,000 $60,000 $30,000 $20,000 Calculate the residual income for each division. Division C $100.000 10.000 $50,000 20% 20% 0 Each division is provided with an investment opportunity that could produce a 20% ROI. Which division w not accept the investment? X
Transcribed Image Text:Sales Operating Income Operating Assets Return on Investment Required rate of return Residual Income Production Variable Costs Fixed Overhead Division A $60.000 4.500 30,000 15% 10% 1.500 Division A manufactures batteries that it sells primarily to Division B. Half the batteries manufactured by Division A were sold to outside companies at a price of $2 each. The remaining batteries were transferred to Division B. The cost data are given below. Variable Selling Expenses Fixed Administrative Expenses What should the transfer price be if the company uses: Sales Operating Income Operating Assets Minimum rate of returi 10% Division B $75,000 25.000 Market Price Variable Cost Consider the following data for three divisions of a conglomerate: Division A Division B Division C $140,000 $180,000 $250,000 5,000 63,000 14,400 20,000 35,000 90,000 19% 20% ABC 250.000 10% 8% 5,000 120,000 units $120,000 $60,000 $30,000 $20,000 Calculate the residual income for each division. Division C $100.000 10.000 $50,000 20% 20% 0 Each division is provided with an investment opportunity that could produce a 20% ROI. Which division w not accept the investment? X
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