The company runs its sections as if they were autonomous operating units. Section directors have a lot

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Question:

The company runs its sections as if they were autonomous operating units. Section directors have a lot of discretion when it comes to pricing and other decisions. Each section must have a rate of return of at least 10% on its operating assets. The paw section has operating assets averaging $500,000. Its legs sell for $10 each; their variable costs are $8 per unit. The section's fixed costs amount to $350,000 per period, and its production capacity is 300,000 legs annually. Return to the starting data. Assume that the normal sales volume is 230,000 tabs per year at a price of $10 per unit. Another section of the company already buys 20,000 tabs per year from a foreign supplier for $9 each. The director of the paw section categorically refused to sell his product at this price on the pretext that it would result in losses for his section. The variable unit costs per leg are $8 and the fixed unit costs are $1.52. This would result in a loss of $0.52 per leg. The director of the paw section also points out that the normal selling price of $10 allows his section to achieve the required rate of return of 10%. If we accept a $9 unit contract, our ROI will certainly suffer! However, my future depends on maintaining this RCI. In addition, manufacturing these additional units would require us to increase our operating assets by at least $50,000 due to the inevitable increase in our inventory and accounts receivable. A) What is the operating profit rate associated with new sales (made internally) if the internal transfer is made at a price of $9? (Justify) (2) a. 9.4% b. 12.5% c. 11.1% d. 10.6% B) What is the asset turnover rate associated with new sales (made internally) if the internal transfer is made at a price of $9? (Justify) (1) a) 3.6 b) 2.3 c) 1.7 d) 5.2 C) What is the return on investment associated with new sales? (Justify) (1.5) a) 37.96% b) 39.96% c) 29.69% d) 11.11% D) What is the company's total operating profit rate? (Justify) (1) a) 3.2% b) 8.2% c) 1.6% d) 4.5% E) What is the company's total asset turnover rate? (Justify) (1) a) 4.42 b) 1.68 c) 5.16 d) 3.96 F) What is the company's return on total invested capital?

a) 12,68%

b) 19,36%

c) 18,28%

d) 20,53%