Reference no: EM132971966
Decentralized Performance Evaluation Problems -
Problem 1 - The Eastern Division of Tencent Industries Co. produced the following operating results for the previous year:
Sales $10,000,000
Segment income 1,500,000
Assets 6,000,000
The Eastern Division is considering a $1,000,000 investment in a new project. The Eastern Division estimates that its return on investment (for all of its operations) would be at 22% with the new investment.
Required -
a) How much net segment income is the new project expected to produce?
b) If the manager of the Eastern Division is evaluated on return on investment alone, will the manager invest in the new project? Explain.
Problem 2 - Concord Company has two divisions, Rice and Pine. Rice produces an item that Pine could use in its production. Pine currently is purchasing 12,000 units from an outside supplier for $18 per unit. Rice is currently operating at less than its full capacity of 500,000 units and has variable costs of $10 per unit. The full cost to manufacture the unit is $14. Rice currently sells 450,000 units at a selling price of $20 per unit.
Required -
a. What will be the effect on Concord Company's operating profit if the transfer is made internally?
b. What is the minimum transfer price from Rice's perspective?
c. What is the maximum transfer price from Pine' perspective?
d. Assume that Rice division is operating at full capacity, what would be its minimum transfer price?
e. Assume that Rice division is operating at 494,000 units for the current period, what would be minimum transfer price to be set up by Rice?
Problem 3 - The Kyoritsu Corporation produces puzzles in its Cabuyao manufacturing plant. The company is currently evaluating ways to improve productivity. The accountant of the firm's parent organization suggested that management implement a new compensation plan based on throughput performance measure as an incentive to increase productivity. To demonstrate how such a measure might work, the accountant gathered the following production data for a recent month:
Total units attempted 6,000,000
Good units manufactured 4,800,000
Processing time (total hours) 800
Value-added processing time 600
Required -
a. Compute manufacturing cycle efficiency.
b. Compute process productivity.
c. Compute process quality yield.
d. Compute hourly throughput.
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Prepare the income statement
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How does the transactions affect operating cash flows
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List fixed and variable expenses separately
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What is the difference between assets and liabilities
: What's the difference between assets and liabilities? Which of the key financial statements features these categories prominently
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Decentralized Performance Evaluation Problems
: Decentralized Performance Evaluation Problems - The Eastern Division is considering a $1,000,000 investment in a new project. How much net segment income
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Calculate the current value of XYZ Corp stock
: Calculate the current value of XYZ Corp. stock (P0), given the following information: Retention ratio = 40% and Required rate of return (R) = 11.5%
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What is the value of XYZs stock today
: The beta of XYZ's stock is 1.25. The price of XYZ's stock next year is expected to be $21(P1). What is the value of XYZ's stock today (P0)
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What is the amount of depreciation for the first full year
: Equipment with a cost of $240,000 has an estimated salvage value of $15,000. What is the amount of depreciation for the first full year
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What is the forecast sales level for this period
: The quarterly seasonal variations affecting sales are as follows: Q1 = -24%, Q2 = -28% Q3 = +22% Q4= +30%. What is the forecast sales level for this period
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