The following data refer to the Daniels division of Tippett Inc. Daniels sells variable- speed drills. The standard drill sells for $ 40, and Daniels plans to sell 30,000 units in 2017. Tippett treats Daniels as an investment center with a total attributable investment of $ 800,000. Daniels' annual fixed costs are $ 200,000. Variable cost per standard drill is $ 24. The firm's required rate of return on investment is 15%. 1.1 What is the expected Return on Investment in 2017? 1.2 What is the expected residual income for Daniels in 2017? A special order from a unit of the US Government has been received to buy from Daniel 10,000 units every year of the device at the price of $30 each. If the order is accepted, Daniels will have to incur additional annual fixed costs of $30,000 for administration and $150,000 to modify and expand the manufacturing facilities. 1.3 Based on the effect on ROI and/or Residual Income for the first year , will the manager accept this order? Why and why not?

The following data refer to the Daniels division of Tippett Inc. Daniels sells variable- speed drills. The standard drill sells for $ 40, and Daniels plans to sell 30,000 units in 2017. Tippett treats Daniels as an investment center with a total attributable investment of $ 800,000. Daniels' annual fixed costs are $ 200,000. Variable cost per standard drill is $ 24. The firm's required rate of return on investment is 15%. 1.1 What is the expected Return on Investment in 2017? 1.2 What is the expected residual income for Daniels in 2017? A special order from a unit of the US Government has been received to buy from Daniel 10,000 units every year of the device at the price of $30 each. If the order is accepted, Daniels will have to incur additional annual fixed costs of $30,000 for administration and $150,000 to modify and expand the manufacturing facilities. 1.3 Based on the effect on ROI and/or Residual Income for the first year , will the manager accept this order? Why and why not?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...

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Concept explainers

Management by Exception

A manager’s job is a very tough one. A manager needs to look at the various areas of work and as a manager he has to look after two or more important jobs or activities at the same time for the growth of the business. In order to do all these things in an effective manner, a manager must adopt or practice different management styles and tactics.

Question

The following data refer to the Daniels division of Tippett Inc. Daniels sells variable- speed drills. The standard drill sells for $ 40, and
Daniels plans to sell 30,000 units in 2017. Tippett treats Daniels as an investment center with a total attributable investment of $ 800,000.
Daniels' annual fixed costs are $ 200,000. Variable cost per standard drill is $ 24. The firm's required rate of return on investment is 15%.
1.1
What is the expected Return on Investment in 2017?
1.2
What is the expected residual income for Daniels in 2017?
A special order from a unit of the US Government has been received to buy from Daniel 10,000 units every year of the device at the price
of $30 each. If the order is accepted, Daniels will have to incur additional annual fixed costs of $30,000 for administration and $150,000
to modify and expand the manufacturing facilities.
1.3
Based on the effect on ROI and/or Residual Income for the first year , will the manager accept this order? Why and why not?

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