Myriam, director of division B, has complete autonomy to make decisions involving better cost management. The following
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Question:
Myriam, director of division B, has complete autonomy to make decisions involving better cost management. The following data concerns Division B forecasts for the year 2021:
Average active balance $10,000,000
Total annual fixed cost $5,000,000
Unit variable cost $30
Planned sales volume 100,000 units
Unit selling price $100
The company requires a minimum rate of return of 16%. She will grant a promotion to Myriam if her division B displays a residual net income (RNR) of $500,000 in 2021. If Myriam wishes to obtain her promotion, what should she do at the total fixed cost of her division B ?
Expert Answer:
To calculate the total fixed cost that Myriams Division B should have in order to achieve a residual ... View the full answer
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