Problem 6:

Problem 7:

Problem 8:

Problem 9:

Residual income The operating income and the amount of invested assets in each division of Stewart Industries are as follows: Assume that management has established a 12% minimum acceptable return for invested assets. a. Determine the residual income for each division. b. Which division has the most residual income? Budget performance report for a cost center GHT Tech Inc. sells electronics over the Internet. The Consumer Products Division is organized as a cost center. The budget for the Consumer Products Division for the month ended July 31 is as follows: During July, the costs incurred in the Consumer Products Division were as follows: 1. Prepare a budget performance report for the director of the Consumer Products Division for the month of July. If an amount box does not require an entry, leave it blank. GHT Tech Inc. 2. For which costs might the director be expected to request supplemental reports? 1. Customer service salaries and marketing salaries as they are significantly over budget 2. Customer service salaries, warehouse wages and marketing salaries as they have significantly changed 3. Engineering salaries and warehouse wages as they are significantly under budget Divisional income statements and return on investment analysis The Crunchy Granola Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30 , 20Y7, are as follows: The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. 2. Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each divisio If required, round your answers to one decimal place. 3. When faced with limited funds for expansion, management should consider an expansion of the Division first. Garcon Inc. manufactures electronic products, with two operating divisions, Consumer and Commercial. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows: *\$150 of the $193 per unit represents materials costs, and the remaining $43 per unit represents other variable conversion expenses incurred within the Commercial Division. The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division's product are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Division is able to produce the materials used by the Commercial Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses. Required: 4. If a transfer price of $126 per unit is negotiated, how much would the operating income of each division and the total company operating income increase? The Consumer Division's operating income would increase by $ The Commercial Division's operating income would increase by $ Garcon Inc.'s total operating income would increase by $ 5a. What is the range of possible negotiated transfer prices that would be acceptable for Garcon Inc.? Any transfer price than the Consumer Division's variable expenses per unit but than the market price would be acceptable. 5b. Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the transfer price? $ 1. Would the market price of $150 per unit be an appropriate transfer price for Garcon Inc.? 2. If the Commercial Division purchases 2,880 units from the Consumer Division, rather than externally, at a negotiated transfer price of $115 per unit, how much would the operating income of each division and the total company operating income increase? The Consumer Division's operating income would increase by $ The Commercial Division's operating income would increase by $ Garcon Inc.'s total operating income would increase by $