Pleasanton Company produces three products: X, Y, and Z. The income statement for 2014 is as follows:

Sales

$3,000,000

Less variable costs

-1,905,000

Contribution margin

$1,095,000

Less fixed expenses:

Manufacturing

$200,000

Selling and administrative

120,000

-320,000

Net income

$755,000

The sales, contribution margin ratios, and direct fixed expenses for the three types of products are as follows:

X

Y

Z

Sales

$900,000

$600,000

$1,500,000

Contribution margin ratio

35%

30%

40%

Direct fixed expenses of products

$80,000

$50,000

$40,000

Prepare income statements segmented by products, and include a column for the entire firm in the statement.

2. The Chip Division of Pleasanton Co. has just revised its actual cost data for the year just ended.Chip Division transfers circuit boards to the Assembly Division, and incurs no selling expense for such transfers.Assembly Division can buy the same goods in the open market for $142 each.Chip's new cost data are:

Direct materials

$60

Direct labor

30

Variable manufacturing overhead

15

Fixed manufacturing overhead

8

Variable selling expenses

6

Fixed selling and administrative expenses

12

Total costs

$131

Desired return

20

Sales price

$151

Current production is 400,000 units, and Chip has a capacity of 600,000 units.

a.What is the lowest price Chip should charge for the internal transfer of its goods?

b.What is the highest price Assembly should pay Chip for the units?

c. Give the primary reason why Chip should reduce its price for internal transfers below the market price.

3. Pleasanton Corporation has the following data for this year:

Bottling Division

Mixing Division

Average operating assets

$320,000

$800,000

Contribution margin

160,000

500,000

Operating income

80,000

120,000

Sales

500,000

1,300,000

Current liabilities

26,000

18,000

Weighted-average cost of capital

17%

17%

Tax rate

28%

28%

Pleasanton Corporation has a target ROI of 17 percent.

a.Calculate the following amounts for each division: ROI, Residual Income, EVA

b.The Mixing Division has an opportunity to invest in a major new project with an expected return of 16%. The division manager's performance is assessed based on division ROI. Would the company overall benefit from moving forward with this project? How does this affect the manager's decision on whether to proceed?

4.Pleasanton Industries has identified list of financial and nonfinancial performance indicators:

Average call wait

Average customer survey rating

Employee turnover ratio

Headcount growth

Job offer acceptance rate

Market share

Net profit margin

New product ROI

Number of complaints

Number of defects reported

Service error rate

Time to market on new products

Year over year revenue growth

a.Assign the identified metrics to Pleasanton's four balanced scorecard categories of (1) Financial Success, (2) Customer Satisfaction and Brand Improvement, (3) Business Process Improvement, and (4) Learning and Growth of Motivated Workforce.

b.Is there value in tracking all these different measures, rather than a single financial measure such as ROI or EVA?