Problem 1: The following data pertain to two divisions, Western and Eastern, of a large corporation. The corporation was established on the East Coast of the United States. It has recently expanded to the West Coast to take advantage of the greater profit potential in the growing western states Eastern Western Profit $3,000,000 $780,000 ssets $24,000,000 S3,900,000 a. b. c. Determine the higher ranked division using residual income each division has a required rate of return cost of capital of 10%) as the criterion. Repeat part (a) using ROA as the criterion How do you explain the conflicting results in parts (a) and (b)? Problem 2: Division A manufactures screens used in high-definition TVs. It sells its one product, a standard screen, for a price of $210 per screen. Variable costs are S90 per screen, and allocated fixed costs amount to $95 per screen. Division B has asked Division A to supply 5,000 custom-made screens. These custom screens have a variable cost of S105 per unit. Division A believes that its standard screen and the custom screen for Division B consume the same amount of capacity to make. It now has the capacity to make 20,000 screen annually. For each of the following scenarios, what is the minimum price per custom screen that Division A can set for this transfer and maintain its profit at the current level? a. Division A is currently making 12,000 standard screens. b. Division A is currently making 20,000 standard screens. c. Division A is making and selling 16,000 standards screens currently. Division B wants to buy all 5,000 screens from Division A or none at all Problem 3: Carol manages the cafeteria at Mercy hospital. On an average month, Carol serves 18,000 meals. Her total monthly variable and fixed costs are S108,000 and S135.000, respectively. She charges individual wards (e.g., surgical, pediatrics) based on the number of meals consumed. The market price for a comparable meal is $12. a. b. c. d. What is Carol's transfer price (the charge per meal) if she only recovers the variable costs? What is Carol's transfer price per meal if she were to recover full cost? If the market price is the tran Why should the cost of the cafeteria be charged to the user departments? How is this information of use to the hospital management? sfer price, calculate the profit or loss from the cafeteria