The Valve Division of Industrial Company produces a small valve that is used by various companies as a component part in their products. Industrial Company operates its divisions as autonomous units, giving its divisional manager great discretion in pricing and other decisions. Each division is expected to generate a rate of return of at least 14 percent on its operating assets. The Valve Division has average operating assets of P700,000. The valves are sold for P5 each. Variable costs are P3 per valve, and fixed costs total P462,000 per year. The Division has a capacity of 300,000 units. How many valves must the Valve Division sell each year to generate the desired rate of return on its assets?
The Valve Division of Industrial Company produces a small valve that is used by various
companies as a component part in their products. Industrial Company operates its divisions as
autonomous units, giving its divisional manager great discretion in pricing and other decisions. Each
division is expected to generate a
Division has average operating assets of P700,000. The valves are sold for P5 each. Variable costs are
P3 per valve, and fixed costs total P462,000 per year. The Division has a capacity of 300,000 units.
How many valves must the Valve Division sell each year to generate the desired rate of return on
its assets?
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