The Operations Division of the NDC plc is evaluating several investment projects. The ENPV method has been considered but the Board of Directors think otherwise. The following information applies to the budgeted operations of the Operations Division of the NDC plc. The Operations Division proposes an initial investment of £250,000 and has budgeted sales of 60,000units at £15 per unit. The contribution per unit is estimated at £4 per unit. The budgeted annual fixed cost is £150,000. There was no closing inventory. The minimum desired return on investment is the cost of capital of 50% a year. The variable cost is £6 per unit. REQUIRED: Calculate divisional profit and comment on the divisional expected return on investment (ROI) and residual income (RI)
The Operations Division of the NDC plc is evaluating several investment projects. The ENPV method has been considered but the Board of Directors think otherwise. The following information applies to the budgeted operations of the Operations Division of the NDC plc. The Operations Division proposes an initial investment of £250,000 and has budgeted sales of 60,000units at £15 per unit. The contribution per unit is estimated at £4 per unit. The budgeted annual fixed cost is £150,000. There was no closing inventory. The minimum desired return on investment is the cost of capital of 50% a year. The variable cost is £6 per unit. REQUIRED: Calculate divisional profit and comment on the divisional expected return on investment (ROI) and residual income (RI)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Operations Division of the NDC plc is evaluating several investment projects. The ENPV method has been considered but the Board of Directors think otherwise. The following information applies to the budgeted operations of the Operations Division of the NDC plc.
The Operations Division proposes an initial investment of £250,000 and has budgeted sales of 60,000units at £15 per unit. The contribution per unit is estimated at £4 per unit. The budgeted annual fixed cost is £150,000. There was no closing inventory. The minimum desired
REQUIRED:
- Calculate divisional profit and comment on the divisional expected return on investment (ROI) and residual income (RI)
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