The following data refers to the Daniels division of Tippett Inc. Daniels sells a specialized electronic...
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The following data refers to the Daniels division of Tippett Inc. Daniels sells a specialized electronic device. The standard device sells for $ 40, and Daniels plans sales of 30,000 units in 2015. Tippett treats Daniels as an investment center with total attributable investment of $800,000. Daniels' annual fixed costs are $ 200,000. Variable cost per unit is $24. The firm's required rate of return on investment is 15%. 1.1 What is the expected Return on Investment in 2015? 1.2 What is the expected residual income for Daniels in 2015? 1.3 A special order from a unit of the US Government has been received to buy from Daniel 10,000 units every year of the device at the price of $30 each. If the order is accepted, Daniels will have to incur additional annual fixed costs of $30,000 for administration and $150,000 to modify and expand the manufacturing facilities. Based on the effect on ROI and/or Residual Income for the first year, will the manager accept this order? Why and why not? The following data refers to the Daniels division of Tippett Inc. Daniels sells a specialized electronic device. The standard device sells for $ 40, and Daniels plans sales of 30,000 units in 2015. Tippett treats Daniels as an investment center with total attributable investment of $800,000. Daniels' annual fixed costs are $ 200,000. Variable cost per unit is $24. The firm's required rate of return on investment is 15%. 1.1 What is the expected Return on Investment in 2015? 1.2 What is the expected residual income for Daniels in 2015? 1.3 A special order from a unit of the US Government has been received to buy from Daniel 10,000 units every year of the device at the price of $30 each. If the order is accepted, Daniels will have to incur additional annual fixed costs of $30,000 for administration and $150,000 to modify and expand the manufacturing facilities. Based on the effect on ROI and/or Residual Income for the first year, will the manager accept this order? Why and why not?
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Cost Management A Strategic Emphasis
ISBN: 978-0077733773
7th edition
Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins
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