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The Switch division of Tornax Inc produces a small switch that is used by various companies as a component part in their products Tornax operates its divisions as autonomous units, giving its divisional managers great discretion in pricing and other decisions Each division is expected to generate a minimum required rate of return of at least 14% on its operating assets The Switch Division has average operating assets of $700,000 The switches are sold for $5 each. Variable costs are $3 per switch, and xed costs total $462,000 per year. The division has a capacity of300,000 switches each year Required: 1. How many switches must the Switch Division sell each year to generate the desired rate of return on its assets? :| a. What is the margin earned at this level of sales? b. What is the turnover at this level of sales? -:| 2. 8. 3. Assume that the Switch Division's current ROI equals the minimum required rate of 14%. In order to increase the division's ROI, the divisional manager wants to increase the selling price per switch by 4%. Market studies indicate that an increase in the selling price would cause sales to drop by 20,000 units each year. However, operating assets could be reduced by $50,000 due to decreased needs for accounts receivable and inventory. Compute the margin, turnover, and ROI if these changes are made. Refer to the original data. Assume again that the Switch Division's current ROI equals the minimum required rate of 14%. Rather than increase the selling price, the sales manager wants to reduce the selling price per switch by 4%. Market studies indicate that this would ll the plant to capacity. In order to carry the greater level of sales, however. operating assets would increase by $50,000. Compute the margin, turnover, and ROI if these changes are made. (Round your intermediate calculations and final answers to 2 decimal places.) _--- w-I- -_-- Ia--I