1. Division A of Daisy, Inc. has $4,950,000 in assets. Its yearly xed costs are $820,500, and the variable costs of its product line are $1.35 per unit. The division's volume is currently 490,000 units. Competitors offer a similar product, at the same quality, to retailers for $3.60 each. Daisy's management team wants to earn a 6% retum on investment on the division's assets. a. What is Division A's target full product cost? b. Given the division's current costs, will Division A be able to achieve its target prot? c. Assume Division A has identied ways to cut its variable costs to $1.20 per unit. What is its new target xed cost? Will this decrease in variable costs allow the division to achieve its target prot? d. Division A is considering an aggressive advertising campaign strategy to differentiate its product 'orn its competitors. The division does not expect volume to be affected, but it hopes to gain more control over pricing. If Division A has to spend $80,000 next year to advertise and its variable costs continue to be $1.20 per unit, what will its cost-plus price be? Do you think Division A will be able to sell its product at the cost-plus price? Why or why not? 2. The division manager of Division B received the following operating income data for the past year: (Click the icon to view the Division B operating income data.) The manager of the division is surprised that the T205 product line is not protable. The division accountant estimates that dropping the T205 product line will decrease xed cost of goods sold by $84,000 and decrease xed selling and administrative expenses by $16,000. :1. Prepare a dierential analysis to show whether Division B should drop the T205 product line. b. What is your recommendation to the manager of Division B? 3. Division 0 also produces two product lines. Because the division can sell all of the product it can produce, Daisy is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data: g (Click the icon to view the Division 0 product data.) After expansion, the factory will have a production capacity of 4,500 machine hours per month. The plant can manufacture either 2? units of K707s or 50 units of 6582s per machine hour. a. Identify the constraining factor for Division C. b. Prepare an analysis to show which product line to emphasize. 4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost of $8,550,000. Expected annual net cash inows are $1 00,000, with zero residual value at the end of 10 years. Under Plan B, Division D would begin producing a new product at a cost of $8,100,000. This plan is expected to generate net cash inows of $1,120,000 per year for 10 years, the estimated useful life of the product line. Estimated residual value for Plan B is $1,000,000. Division D uses straight-line depreciation and requires an annual return of 9%. a. Compute the payback, the ARR, the NPV, and the protability index for both plans. b. Compute the estimated IRR of Plan A. c. Use Excel to verify the NPV calculations in Requirement 4(a) and the actual IRR for the two plans. How does the IRR of each plan compare with the company's required rate of return? d. Division D must rank the plans and make a recommendation to Daisy's top management team for the best plan. Which expansion plan should Division D choose? Why? Division B of Daisy, Inc. Income Statement For the Year Ended December 31, 2018 Product Line T205 B179 Total Net Sales Revenue $ 270,000 $ 380,000 $ 650,000 Cost of Goods Sold: Variable 36,000 46,000 82,000 Fixed 230,000 65,000 295,000 Total Cost of Goods Sold 266,000 111,000 377,000 Gross Profit 4,000 269,000 273,000 Selling and Administrative Expenses: Variable 66,000 75,000 141,000 Fixed 56,000 28,000 84,000 Total Selling and Administrative Expenses 122,000 103,000 225,000 Operating Income (Loss) $ (118,000) $ 166,000 $ 48,000Per Unit K707 6582 Sales price $ 96 $ 54 Variable costs 27 24 $ 69 $ 30 Contribution margin Contribution margin ratio 71.9% 55.6%