Document 1 Microsoft Word ble Tool Insert Page Layout References Mailings Review View Developer Design Layout AaBbccDo AaBbci AaBbco AaB AaBbCCD AaBbCc 1 Normal 1 No Spaci... Heading 1 Heading 2 Title Subtitle Subtle Em Format Painter Clipboard Font Paragraph $3,500,000.00 Cost of goods sold 2,480,000.00 8 Gross profit S1.020,000.00 Operating expenses 600,000.00 5 Income from operations S420,000.00 Invested assets S2.500,000.00 Assume that the Commercial Division received no charges from service departments. The president of Maxell Manufacturing has indicated that the division's rate of return on a S2,500,000 investrment must be increased to at least 21% by the end of the next year if operations are to continue. The division manager is considering the following three proposals: Proposal 1. Transfer equipment with a book value of $312,500 to other divisions at no gain orloss and lease similar equipment. The annual lease payments would exceed the amount of depreciation expense on the old equipment by S105,000. This increase in expense would be included as part of the cost of goods sold. Sales would remain unchanged. Proposal 2: Purchase new and more efficient machining equipment and thereby reduce the cost of goods sold by $560,000 after considering the effects of depreciation expense on the new equipment. Sales would remain unchanged, and the old equipment, which has no remaining book value, would be scrapped at no gain or loss. The new equipment would increase invested assets by an additional $12875,000 for the year. Proposal 3: Reduce invested assets by discontinuing a product line. This action would eliminate sales of $595.000, reduce cost of goods sold by $406.700, and reduce operating expenses by $175.000. Assets of $113383000 would be transferred to other divisions at no gain or loss Page: 1 of 1 words: 272 Type alk to search Emph Find Ch Select Editing 31 AM 4/5/2017