1.

The income from operations and the amount of invested assets in each division of Beck Industries are as follows:

	Income from Operations		Invested Assets
Retail Division	$118,800		540,000
Commercial Division	124,800		520,000
Internet Division	46,800		260,000

Assume that management has established a 10% minimum acceptable return for invested assets.

a. Determine the residual income for each division.

	Retail Division			Commercial Division			Internet Division
Income from operations	$118,800			$124,800			$46,800
Minimum acceptable of income from operations	__________			______________			_____________
Residual income	$			$			$

b. Which division has the most residual income? ________

2.

Materials used by the Instrument Division of T_Kong Industries are currently purchased from outside suppliers at a cost of $440 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $365 per unit.

a. If a transfer price of $400 per unit is established and 35,100 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would T_Kong Industries total income from operations increase? $_____________

b. How much would the Instrument Divisions income from operations increase? $_____________

c. How much would the Components Divisions income from operations increase? $_____________

3.

The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department charges):

Sales	$240,000,000
Cost of goods sold	115,700,000
Gross profit	$124,300,000
Administrative expenses	65,400,000
Operating income	$58,900,000

The manager of the Consumer Products Division is considering ways to increase the return on investment.

1. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $105,820,000 of assets have been invested in the Consumer Products Division. Round your answers for the profit margin and the rate of return on investment to the nearest whole number, round your answer for the investment turnover to two decimal places.

   Profit margin	___________ %
   Investment turnover	___________
   Rate of return on investment	___________ %

2. If expenses could be reduced by $3,150,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round your answers for the profit margin and the rate of return on investment to the nearest whole number, round your answer for the investment turnover to two decimal places.

   Profit margin	__________%
   Investment turnover	___________
   Rate of return on investment	__________%

All part of one big problem.

Thanks!!