61 Discontinuance of any division would save 50% of the fixed costs and expenses for that division. Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued. (a) Your answer is partially correct. Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number eg -45 or parentheses eg. (45)) Division I Division II Contribution margin 70,764 eTextbook and Media Assistance Used Last saved 12 hours ago. Attempts: 2 of 5 used Submit Answer Save for Later

1. Compute return on investment (ROI). 2. Compute residual income. 日 તે FILE HOME INSERT * Calibri h Paste BIU Clipboard Б A1 × - Return on Investment (ROI) and Residual Income - Excel PAGE LAYOUT 11 Α' Α' FORMULAS DATA % REVIEW ? - VIEW A Alignment Number Conditional Format as Cell Cells - Font fx Б Formatting Table▾ Styles▾ Styles Editing X Sign In Adams Corporation evaluates divisional managers based on ROI. Operating A B с D E F 1 Adams Corporation evaluates divisional managers based on ROI. Operating results for the 2 company's Northern Division for last year are given below: 3 4 5 6 7 8 9 10 11 Sales Variable expenses Contribution margin Fixed expenses Net operating income Average divisional operating assets 9,500,000 12 The Northern Division has an opportunity to add a new product line at the beginning of the year as follows: $ 27,000,000 16,200,000 10,800,000 8,805,000 1,995,000 13 14 15 16 Average required investment Net operating income 17 Adams Corporation's minimum…

Coronado Division has the following data: Sales Variable expenses Fixed expenses $509000 231000 286000 The fixed costs are not avoidable and must be allocated to profitable divisions if the segment is eliminated. What will be the incremental effect on net income if Coronado Division is eliminated? O $223000 increase O $278000 decrease O $286000 decrease Cannot be determined from the data provided

44. JetSky Airways has three divisions, the Western Division, the Eastern Division, and the Northern Division. The manager of the Western Division had wanted to purchase replacement airplanes for the division. However, he decided against it because, although revenues would increase and the new planes would be less expensive to operate, the initial cost of the planes was quite large. The Western Division is most probably accounted for as a(n) * cost center. None of these. O revenue center. investment center. profit center.

Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $447 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $371 per unit. Assume that a transfer price of $425 has been established and that 26,500 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? C. How much would the Components Division's operating income increase? d. Any transfer price will cause the total income of the company to as long as the supplier division capacity is toward making materials for products that are ultimately sold to the outside.

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Knowledge Check 01 Match the term and the definition. 1. Wages paid to the division's employees who will be downsized if the division is dropped Avoidable 2 General management expenses allocated to the Orange County division. Unavoidable Unavoidable Unavoidable Unavoidable 3. Cost of machinery purchased for the Orange County division. 4. Rent paid for the division's regional office 5. Cost of the private jet purchased for the company management's use.

Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $316 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $262 per unit. a. If a transfer price of $288 per unit is established and 27,900 units of materials are transferred, with no reduction in the Components Division's current sales, how much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? $ C. How much would the Components Division's operating income increase?

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