Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel millsthe Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $155,100 per year, consisting of $0.2 per ton variable cost and $105,100 xed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 64% of the Transport Services Department's capacity and the Southern Plant requires 36%. During the year, the Transport Services Department actually hauled 114,000 tons of ore to the Northern Plant and 51,200 tons to the Southern Plant, The Transport Services Department incurred $361,000 in cost during the year, of which $52,900 was variable cost and $308,100 was xed cost. Required: 1. How much of the Transport Services Department's variable costs should be charged to each plant? 2. How much of the $308,100 in fixed cost should be charged to each plant? 3. Should any of the Transport Services Department's actual total cost of $361,000 be treated as a spending variance and not charged to the plants? Complete this question by entering your answers in the tabs below. Required 1 : Required 2 Required 3 How much of the Transport Services Department's variable costs should be charged to each plant? Variable cost charged to Northern Plant Variable cost charged to Southern Plant Required 1 Required 2 Required 3 How much of the fixed cost should be charged to each plant? Fixed cost charged to Northern Plant Fixed cost charged to Southern PlantRequired 1 Required 2 Required 3 Should any of the Transport Services Department's actual total cost of $361,000 be treated as a spending variance and not charged to the plants? _:| Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board $ 176 Variable cost per circuit board $ 114 Number of circuit boards: Produced during the year 21,600 Sold to outside customers 14,200 Sold to Division B 7.4% Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $290 in additional variable cost per instrument and then sold the instruments for $670 each. Required: 1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 21,600 circuit boards. Next year, Division B wants to purchase 8,400 circuit boards from Division A rather than 7,400. (Circuit boards of this type are not available from outside sources.) From the standpoint of the company as a whole, should Division A sell the 1,000 additional circuit boards to Division B or continue to sell them to outside customers? Required 1 Required 2 Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Division A Division B Total Company Sales Expenses: Added by the division Transfer price paid Total expenses 0 0 0 Net operating income $ 0 $ 0 EA O\"I know headquarters wants us to add that new product line," said Dell Havasi, manager of Billings Company's Ofce Products Division. \"But I want to see the numbers before I make any move. Our division's return on investment (ROI) has led the company for three years, and I don't want any letdown.\" Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company's Ofce Products Division for this year are given below: Sales $ 21,500,000 Variable expenses 13,565,000 Contribution margin 7,935,000 Fixed expenses 5,995,000 Net operating income :15 1,940,000 Divisional. average operating assets $ 4.301.500 The company had an overall return on investment (ROI) of 17.00% this year (considering all divisions). Next year the Ofce Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $2,313,700. The cost and revenue characteristics of the new product line per year would be: Sales $9,255,000 Variable expenses 6595 of sales Fixed expenses $2,552,650 I Required: 1. Compute the Ofce Products Division's margin, turnover, and ROI for this year. 2. Compute the Ofce Products Division's margin, turnover, and ROI for the new product line by itself. 3. Compute the Ofce Products Division's margin, turnover, and ROI for next year assuming that it performs the same as this year and adds the new product line. 4. If you were in Dell Havasi's position, would you accept or reject the new product line? 5. Why do you suppose headquarters is anxious for the Ofce Products Division to add the new product line? 6. Suppose that the company's minimum required rate of return on operating assets is 14% and that performance is evaluated using residual income. a. Compute the Office Products Division's residual income for this year. b. Compute the Office Products Division's residual income for the new product line by itself. c. Compute the Office Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. d. Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new product line? Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 Req 5 Req 6A to 6C Req 6D 1. Compute the Office Products Division's margin, turnover, and ROI for this year. 2. Compute the Office Products Division's margin, turnover, and ROI for the new product line by itself. 3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming that it performs the same as this year and adds the new product line. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Show less 1 . ROI for this year % 2. ROI for the new product line by % itself 3. ROI for next year %Req 6A to SC 6. Suppose that the company's minimum required rate of return on operating assets is 14% and that performance is evaluated using residual income. a. Compute the Office Products Division's residual income for this year. b. Compute the Ofce Products Division's residual income for the new product line by itself. c. Compute the Ofce Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. Show IessA Residual income for this year _ Residual income for the new product line by itself _ 3. Residual income for next year The contribution format income statement for Huerra Company for last year is given below: Total. Unit Sales $ 1,006,000 $ 50.30 Variable expenses 603,600 30.18 Contribution margin 402,400 20.12 Fixed expenses 324,400 16.22 Net operating income 78,000 3.90 Income taxes @ 4095 31,200 1.56 Net income 1' 46,800 $ 2.34 The company had average operating assets of $502,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for the period. For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI figure. Consider each question separately, starting in each case from the data used to compute the original ROI in (1) above. 2. Using Lean Production, the company is able to reduce the average level of inventory by $91,000. 3. The company achieves a cost savings of $7,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $124,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 per year. 5. As a result of a more intense effort by sales people, sales are increased by 20%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $17,000 is scrapped and written off as a loss, thereby lowering net operating income. 7. At the beginning of the year, the company uses $180,000 of cash (received on accounts receivable) to repurchase some of its common stock. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Compute the company's margin, turnover; and return on investment (ROI) for the period. (Round your intermediate calculations and nal answer to 2 decimal places.) Turnover Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Using Lean Production, the company is able to reduce the average level of inventory by $91,000. (Round your intermediate calculations and nal answer to 2 decimal places.) Turnover Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 The company achieves a cost savings of $7,000 per year by using less costly materials. (Round your intermediate calculations and final answer to 2 decimal places.) Turnover Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 The company purchases machinery and equipment that increases average operating assets by $124,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 per year. (Do not round intermediate calculations and round your nal answers to 2 decimal places.) m_l Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 As a result of a more intense effort by sales people, sales are increased by 20%; operating assets remain unchanged. (Round your intermediate calculations and final answer to 2 decimal places.) Turnover Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 At the beginning of the year, obsolete inventory carried on the books at a cost of $17,000 is scrapped and written off as a loss, thereby lowering net operating income. (Round your intermediate calculations and final answer to 2 decimal places.) Turnover