1 Question

Cortez Cororation has two divisions, Cadiz and Barcelona. Cadiz currently sells a widget to outside manufacturers of ship navigation systems for $775 each. Varible production costs total $500 per unit. Its plant capacity is 100,000 units. Barcelona currently purchases the widgets that it needs from an outside supplier for $750. It requires 20,000 units per year and is considering changing suppliers so that it can purchase the widgets from the Cadiz Division. Required: 1. Calculate the transfer price range assuming that Cadiz is currently selling all that it can produce to outside customers. 2. Calculate the transfer price range assuming that Cadiz is currently selling 80,000 units to outside customers.

2 Question

Fulcrum Inc. has provided you with the following results for the first three quarters of 2021. The results have been poor and the general manager, Carlos Ortiz, who is evaluated on the basis of improvement in ROI from the previous period, is concerned that he will receive a poor performance evaluation. The company's target rate of return is 18%. Data for the first 3 quarters are: Sales $ 4,500,000 Operating income $ 1,250,000 Total Assets $ 8,900,000 Carlos is considering the following changes in the last quarter to try to improve the current ROI. Option A: Sell off excess land with a book value of $400,000 for $600,000. Option B: Acquire a new machine for $300,000, It is expected to gererate operating income of $75,000 in the last quarter. Option C: Paid off $400,000 of long-term debt to save $12,000 of interest expense Option D: Increase collection efforts which will result in collecting $50,000 of overdue accounts receivable. Required: 1 Calculate RI for the first 9 months. 2 Use total assets, not average assets. For each of these options, indicate whether the company should implement them based solely on Calculate the effect each of these independent options would have on the company's ROI.