Three divisions of Jameson Co. report the following sales and operating data: Sales Average operating assets Operating income Minimum required rate of return Fitness Training $610,000 $152,500 $ 24,400 134 Spa Services $810,000 $202,500 $ 32,400 158 Athletic Wear $600,000 $150,000 $ 30,000 13 Required: 1. Compute the ROI for each division, using the formula stated in terms of margin and turnover Fitness training Spa services Athletic wear ROI % % % 2. Compute the residual income for each division Fitness Training Spa Services Athletic Wear Residual income 3. Assume that each division is presented with an investment opportunity that would yield a rate of return of 20%, a. I performance is being measured by ROI, which division or divisions will probably accept the opportunity Fitness Training Spa Services Athletic Wear b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Fitness Training Spa Services Athletic Wear Collyer Products Inc. has a Valve Division that manufactures and sells a standard valve as follows: Capacity in units Selling price to outside customers on the internediate market Variable costs per unit Fixed costs per unit (based on capacity) 220,000 23 15 12 The company has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 22,000 valves per year from an overseas supplier at a cost of $22 per valve. Required: 1. Assume that the Voive Division has ample idle capacity to handle all of the Pump Division's needs. What is the acceptable range, any, for the transfer price between the two divisions? Transfer poco 2. Assume that the Valve Division is selling all that it can produce to outside customers on the intermediate market. What is the acceptable range, if any, for the transfer price between the two divisions? 3. Assume again that the Valve Division is selling all that it can produce to outside customers on the intermediate market. Also assume that $2 in variable expenses can be avoided on transfers within the company, due to reduced selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? Thanat price 4. Assume the Pump Division needs 32,000 special high-pressute valves per year. The Valve Division's variable costs to manufacture and ship the special valve would be $14 per unit. To produce these special valves, the Valve Division would have to reduce its production and sales of regular valves from 220,000 units per year to 170,000 units per year. As far as the Valve Division is concerned, what is the lowest acceptable transfer price? (Round your answer to 2 decimal places.) Truratu pro
