Homework Assignment Chapter 13 BUS 424 Managerial Accounting & Control Meshari ALQahtani 13-40

sales variable costs Fixed costs invested capital add invested capital 1) ROI of the Western Division income ROI

Western Division $4,200,000 $2,940,000.0 $1,075,000 $925,000

Competitor $2,600,000 $1,690,000.00 $835,000 $312,500 $187,500

$185,000 20%

Western Division ROI if the competitor is acuired Sales $6,800,000 variable costs $4,630,000.00 fixed costs $1,910,000 income $260,000.00 ROI 18.3%

2) The Divisional management reaction toward the acquisition will be against it because the ROI will be too low. 3)
An examination of the competitors financial statistics reveals incone ROI competitor's ROI

$75,000.00 $0.24 $0.15

The megatronics Corporate management reaction toward the acquisition will be likely with it since the competitors ROI of 24% and even if with the upgrade the competitors ROI will be 15% which is good for them.

4) division without upgrade the competitor to megatronics' standards sales Variable costs Fixed Costs income ROI yes since the divisional ROI would increase to 21.01%. $6,800,000 $4,630,000.00 $1,910,000 $260,000.00 21%

5) residual income of the western division divisional profit $185,000 invested capital $111,000.00 income $74,000.00 Residual income if competitor is acquired divisional profit invested capital with interest income $260,000.00 $1,425,000.00 $171,000.00 $89,000.00

Yes, the divisions management will change its attitude toward the acquisition because the residual income will increase by $15,000.

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Frame Division Glass Division DM $30 $60 DL 40 30 VOH 60 60 total $130 $150 1) Transfer price for window frames = outlay cost + opportunity cost a) Transfer price for window frames Transfer price = standard variable cost + (10%)(standard variable cost) b) Transfer price with 10% markup 2) Transfer price for window frames = outlay cost + opportunity cost a) Transfer price for window frames b) Because if there is excess capacity in the frame division the opportunity cost will be 0. And the Fixed OH per frame c) Transfer price with 10% markup = variable cost + fixed overhead per frame + (10%)(variable cost + fixed overhead per frame)
d) Incremental revenue per window Total variable cost Incremental contribution per window - The special order should be accepted the incremental revenue exceeds the incremental cost e) $310 Incremental revenue per window $198.0 0 Transfer price for frame DM $60 DL 30 VO H 60 $348 Total incremental cost Incremental loss per window in special order for glass ($38) $31 0 $28 0 $30

$160 $143. 0

$130

$50.00 $198.0 0

division - The special order should be rejected because the glass division's net income would be reduced by $38 for every window in the order.