Récré-Gaules SARL produces and distributes a wide variety of recreational products. One of its divisions, the Idefix
Question:
Total annual fixed costs ..............................................€1000000
Variable costs per menhir...................................................€300
Average number of menhirs sold each year.............................10000
Average operating assets invested in the division.................€1600000
Required
1. What is the minimum selling price per unit that the Idefix Division could charge in order for Marie-Aimée Obelix, the division manager, to get a favourable performance rating? Management considers an ROI below 20% to be unfavourable.
2. Assume that Récré-Gaules judges the performance of its investment centre managers on the basis of residual income rather than ROI, as was assumed in requirement 1. The company's required rate of return is considered to be 15%. What is the minimum selling price per unit that the Idefix Division should charge for Obelix to receive a favourable performance rating?
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Related Book For
Management and Cost Accounting
ISBN: 978-1405888202
4th edition
Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster
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