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D E F F C Balance Sheet 7 Assets: 8 Cash 9 Accounts receivable 10 Inventory 11 Plant and equipment (net) 12 Investment in Balsam Company 13 Land (undeveloped) 14 Total assets Beginning Balance 88,000 $ 144,000 63,000 195,000 35,000 100.000 625.000 $ Ending Balance 86,000 138,000 56,000 190,000 55,000 100.000 625.000 15 16 Liabilities and owners' equity 17 Accounts payable 18 Long-term debt 19 Owners' equity 20 Total liabilities and owners' equity 70,000 $ 485.000 70.000 625.000 S 75,000 460,000 90.000 625.000 21 Pink Perfume Company Income Statement 24 25 Sales 26 Cost of Goods Sold $1.272.000 855.000 Income Statement 25 Sales P6 Cost of Goods Sold 27 Gross Profit 28 Less operating expenses 29 Net operating income 30 Less interest and taxes: 31 Interest expense 32 Tax expense 33 Net income $1,272,000 855,000 417,000 315.000 102.000 35,000 15.000 50.000 52.000 36 The company paid dividends of $32,000 last year 37 The Investment in Balsam Company" on the statement of financial position represents an investment in the stock of another company 39 Required: 41 a Compute the company's margin, turnover, and retum on investment for last year. 43 62 b. The Board of Directors of Pink Perfume has set a minimum required return of 63 What was the company's residual income last year? 20.00% 3 Omni Enterprises Ltd. has a number of divisions including Omni-Press Division, a producer of high-end air compressors, and Omes-Construct Division, a homebuilder 5 Omni-Press produces the Xtreme 880 air compressor that can be used by Omn Construct to build residential homes 6 The market price of the Xtreme 880 is $ 1,600 The full cost of the unit is $ 975 1) a) If Omni's transfer policy require transferat full cost what will the transfer price be? b) Do you suppose both divisions will choose to transfer at that price? 2) a) Omnis transfer policy require transfer at market price, what will the transfer price be? b) Do you suppose both divisions will choose to transfer at that price? 3) a) I Omni allows negotiated transfer pricing and Omni-Press can avoid selling expenses of $225 by selling to Omni-Construct, which division sets the minimum transfer price and what is that amount? b) Which division sets the maximum transfer price and what is that amount? c) Do you think that the two divisions would choose to transfer somewhere in the bargaining range? If so, how will the price be determined? D E F F C Balance Sheet 7 Assets: 8 Cash 9 Accounts receivable 10 Inventory 11 Plant and equipment (net) 12 Investment in Balsam Company 13 Land (undeveloped) 14 Total assets Beginning Balance 88,000 $ 144,000 63,000 195,000 35,000 100.000 625.000 $ Ending Balance 86,000 138,000 56,000 190,000 55,000 100.000 625.000 15 16 Liabilities and owners' equity 17 Accounts payable 18 Long-term debt 19 Owners' equity 20 Total liabilities and owners' equity 70,000 $ 485.000 70.000 625.000 S 75,000 460,000 90.000 625.000 21 Pink Perfume Company Income Statement 24 25 Sales 26 Cost of Goods Sold $1.272.000 855.000 Income Statement 25 Sales P6 Cost of Goods Sold 27 Gross Profit 28 Less operating expenses 29 Net operating income 30 Less interest and taxes: 31 Interest expense 32 Tax expense 33 Net income $1,272,000 855,000 417,000 315.000 102.000 35,000 15.000 50.000 52.000 36 The company paid dividends of $32,000 last year 37 The Investment in Balsam Company" on the statement of financial position represents an investment in the stock of another company 39 Required: 41 a Compute the company's margin, turnover, and retum on investment for last year. 43 62 b. The Board of Directors of Pink Perfume has set a minimum required return of 63 What was the company's residual income last year? 20.00% 3 Omni Enterprises Ltd. has a number of divisions including Omni-Press Division, a producer of high-end air compressors, and Omes-Construct Division, a homebuilder 5 Omni-Press produces the Xtreme 880 air compressor that can be used by Omn Construct to build residential homes 6 The market price of the Xtreme 880 is $ 1,600 The full cost of the unit is $ 975 1) a) If Omni's transfer policy require transferat full cost what will the transfer price be? b) Do you suppose both divisions will choose to transfer at that price? 2) a) Omnis transfer policy require transfer at market price, what will the transfer price be? b) Do you suppose both divisions will choose to transfer at that price? 3) a) I Omni allows negotiated transfer pricing and Omni-Press can avoid selling expenses of $225 by selling to Omni-Construct, which division sets the minimum transfer price and what is that amount? b) Which division sets the maximum transfer price and what is that amount? c) Do you think that the two divisions would choose to transfer somewhere in the bargaining range? If so, how will the price be determined