Division was profitable immediately under the new ownership

Assignment Help Financial Management
Reference no: EM131065843

This week's question focuses on cost allocation. A major manufacturer decided to put one of its divisions up for sale because managerial information showed the components produced by this division is losing money. A group of employees in the division purchased it. Under the new ownership, the division immediately became profitable.

A. Why do you think the division was profitable immediately under the new ownership?

B. What kind of cost allocation method may have caused the sale of a profitable division, and can you suggest a better method of cost allocation? Explain why?

Note the use of the word immediately above!

Reference no: EM131065843

Questions Cloud

Discover five earlier precursor technologies : Follow the paradigm technology backwards to discover at least 5 earlier precursor technologies (levels). Find those that have had a major influence on the paradigm tech (not just versions of the same technology).
Mineral depost in addions to the purchse price : Coal train paid $430,000 for the right are from a 375,000 ton mineral depost in addions to the purchse price, coal trian Mines also paid a $2,500 license fee to the of wast vignia, and $81,110 for a goobgical sunny of the property.
Compute luxuryair depreciation on the plane : In question #2 the choices shown in blank 1 are the same as blank 2 Assume that on September 30, 2011, Luxuryair, the national airline of Germany, purchased a Jumbo aircraft at a cost of 42,500,000 (is the symbol for the euro).
Article summary requirements : To write a summary, use your own words to express the main ideas and relevant details of the article you have read.Your purpose in writing the summary is to give the basic ideas of the original article.What was it about and what were the key point..
Division was profitable immediately under the new ownership : This week's question focuses on cost allocation. A major manufacturer decided to put one of its divisions up for sale because managerial information showed the components produced by this division is losing money. Why do you think the division was pr..
Company assigned-avery dennison corp : Analysis of Historical Performance (revenue and market share for 5 years) and Implications for Financial Management. Discuss the reasons (external and internal) for the yearly changes in the data.
Define the nominal risk-free rate : Define the nominal risk-free rate (rRF) and provide an example relevant to your target audience of a specific security that can be used as an estimate of rRF.
What volume of 5 m nahco3 solution : What volume of 5 M NaHCO3 solution
Descriptive writing and grammar review : Read the "The Secret Power of Things We Hold Dear" (2007) by Sherry Turkle (search for this online or in the EBSCO database). Read Writing Elements: A Quick Guide to Grammar and Usage (2012) by Goss and Goss (find this in this week's readings or in ..

Reviews

Write a Review

Financial Management Questions & Answers

  Call option on a non-dividend-paying stock

What is the price of a European call option on a non-dividend-paying stock when the stock price is 652, the strike price is $60, the risk-free interest rate is 12% per annum, the volatility is 30% per annum, and the time to maturity is three months?

  State the hypotheses for this problem and test it

State the hypotheses for this problem and test it. What is the probability of a type 1 error?

  What is its cash conversion cycle

Everdeen, Inc has a 100-day operating cycle. If its average age of inventory is 35 days, how long is its average collection period? If its average payment period is 30 days, what is its cash conversion cycle?

  Stock-picking investment strategy

To what extent does the CAPM model coincide with, or collide with, a stock-picking investment strategy (such as Warren Buffet’s). To what extent does the APT model coincide with, or collide with, a stock-picking investment strategy?

  What is the cost of equity after recapitalization

Cops & Co. expects its EBIT to be $60,000 every year forever. A cop currently has no debt and its cost of equity is 22 percent. The firm is considering issuing new par bonds and uses the proceeds of the new debt to repurchase equity. What is the valu..

  Dividends will grow over the next five years

Four years ago, ACME paid a dividend of $1.20 per share. ACME paid a dividend of $1.93 per share yesterday. Dividends will grow over the next five years at the same rate they grew over the last four years. Thereafter, dividends will grow at 7% per ye..

  Use straight-line depreciation to zero over projects life

You are evaluating two different silicon wafer milling machines. The Techron I costs $216,000, has a three-year life, and has pretax operating costs of $55,000 per year. The Techron II costs $380,000, has a five-year life, and has pretax operating co..

  How much net cash flow would be generated

A firm purchased equipment three years ago for $23,942. Accumulated depreciation is $14,434, and the firm's tax rate is 30%. If the equipment is sold today for $22,879, how much net cash flow would be generated? Round your answer to the nearest whole..

  Expected return on the market portfolio

A stock has a beta of 2.0; the risk-free rate of return is 7%, and the expected return on the market portfolio is 12%. If this stock's expected return is 18%, the share are_____and their price will _____?

  How much should the group borrow

The Omega Venture Group needs to borrow to Finance a project. Repayment of the loan involves payments of $5660 at the end of every six months for six years. No payments are to be made during the development period of two years. Interest is 9% compoun..

  Return on the average stock in the market

What is the maximum price you would pay for a common stock given that the risk free rate of return is 4%, the current dividend is $6.00, the return on the average stock in the market is 11%, the growth rate in dividends for the stock is 4% per year, ..

  What is the price of the stock today

Upper Gullies Corp. just paid a dividend of $2.10 per share. The dividends are expected to grow at 21 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the pr..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd