Consider the following data regarding budgeted operations for 2012 of the Winnipeg division of Machine Products: a.

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Consider the following data regarding budgeted operations for 2012 of the Winnipeg division of Machine Products: 

Average available assets $ 220,000 Receivables Inventories 290,000 Plant and equipment, net 450,000 $ 960,000 $ 300,000

a.

1. What average unit sales price does the Winnipeg division need to obtain its desired rate of return on average available assets?

2. What would be the expected capital turnover? 

3. What would be the return on sales? 3

b. 

1. If the selling price is as computed above, what rate of return will the division earn on available assets if sales volume is 170,000 units? 

2. If sales volume is 130,000 units? 

c. Assume that the Winnipeg division plans to sell 45,000 units to the Calgary division of Machine Products and that it can sell only 105,000 units to outside customers at the price computed in requirement 1a. The Calgary division manager has balked at a tentative selling price of $4. She has offered $2.25, claiming that she can manufacture the units herself for that price. The Winnipeg division manager has examined his own data. He had decided that he could eliminate $60,000 of inventories, $90,000 of plant and equipment, and $22,500 of fixed overhead if he did not sell to the Calgary division and sold only 105,000 units to outside customers. Should he sell for $2.25? Show computations to support your answer.


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Related Book For  answer-question

Management Accounting

ISBN: 978-0132570848

6th Canadian edition

Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu

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