Dix 0,0 642 e inp Requirements 1. Division A of Dixon, Inc. has $5,400,000 in assets. Its yearly fixed costs are $766,000, and the variable costs of its product line are $1.90 per unit. The division's volume is currently 460,000 units. Competitors offer a similar product, at the same quality, to retailers for $4.25 each. Dixon's management team wants to earn a 6% return 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 profit? c. Assume Division A has identified ways to cut its variable costs to $1.75 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the division to achieve its target profit? d. Division A is considering an aggressive advertising campaign strategy to differentiate its product from 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 $1.75 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 profitable. The division accountant estimates that dropping the T205 product line will decrease fixed cost of goods sold by $84,000 and decrease fixed selling and administrative expenses by $17.000. a. Prepare a differential analysis to show whether Division B should drop the T205 product line Drint e been as volume is Dix 00.0 $42 the inp continue to be $1.75 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 profitable. The division accountant estimates that dropping the T205 product line will decrease fixed cost of goods sold by $84,000 and decrease fixed selling and administrative expenses by $17,000. a. Prepare a differential 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 C also produces two product lines. Because the division can sell all of the product it can produce, Dixon is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data: (Click the icon to view the Division C product data.) 4 After expansion, the factory will have a production capacity of 4,200 machine hours per month. The plant can manufacture either 28 units of K707s or 58 units of G582s 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 $8.500.000 Expected annual net cash inflows are $1.600.000 with zero residual value at the Print Done voli Data Table Division B of Dixon, Inc. Income Statement For the Year Ended December 31, 2018 Net Sales Revenue Cost of Goods Sold Variable Fixed Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses Variable Did Print $ Done Clear All Product Line T205 360,000 $ 39,000 270,000 309,000 51,000 65.000 B179 Total 370,000 $ 730,000 37,000 76,000 60,000 330,000 97,000 406,000 273,000 324,000 82.000 147.000 - X e been aske volume is cum Data Table Net Sales Revenue Cost of Goods Sold: Variable Fixed Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses: Variable Fixed Total Selling and Administrative Expenses Operating Income (Loss) D $ Product Line T205 Print Done Clear All 360,000 $ 39,000 270,000 309,000 51,000 65,000 61,000 126,000 (75,000) $ B179 Total 370,000 $ 730,000 37,000 60,000 97,000 273,000 82,000 22,000 104.000 169,000 $ 76,000 330,000 406,000 324,000 147,000 83,000 230,000 94,000 - X W e been asked t volume is curre $84,0 a. P b. W 3. Divisi produ this d EEB ( After plant a. Id b. P 4. Divisi cost o end of $8,10 Astima Sales price Variable costs Contribution margin Contribution margin ratio Print Done K707 Per Unit 86 S 22 64 $ 74.4% G582 52 25 27 51.9% ke at a 2 the volu inp produce, Dixons Expanumy are prant and needs to decide which product me to emphasize. TO TAKE this decision, the division accountant assembled the following data: (Click the icon to view the Division C product data.) After expansion, the factory will have a production capacity of 4,200 machine hours per month. The plant can manufacture either 28 units of K707s or 58 units of G582s 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 $8,500,000. Expected annual net cash inflows are $1,600,000, 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 inflows of $1,080,000 per year for 10 years, the estimated useful life of the product line. Estimated residual value for Plan B is $1,200,000. Division D uses straight-line depreciation and requires an annual return of 10%. a. Compute the payback, the ARR, the NPV, and the profitability 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 Dixon's top management team for the best plan. Which expansion plan should Division D choose? Why? Print Done volu Doug Dixon, majority stockholder and president of Dixon, Inc., is working with his top managers on future plans for the company. As the company's managerial accountant, you've been asked to analyze the following situations and make recommendations to the management team Read the requirements Requirement 1. Division A of Dion, Inc. has 55,400,000 in assets s yearly fixed costs are $766,000, and the variable costs of its product line are $1.50 per unit. The division's volume is currently 450,000 units Competitors offer a similar product, at the same quality, to retailers for $425 each Door's management team wants to nam a 6% return on investment on the division's 1a. What is Division A's target full product cost? Lass Target of product cost