Problem 1

Roy Corp.'s balance sheet indicates that the company has P5M investment in operating assets. During 2021, Roy earned P1.1M of net income on P11M of sales.

Required:

1. Compute Roy's margin for 2021.

2. Compute Roy's turnover for 2021.

3. Compute Roy's ROI for 2021.

4. Recompute Roy's ROI under each of the following independent assumptions:

a. Sales increase from P5M to P6M and income increases from P1.1 to P1.3M.

b. Sales remain constant, costs and expenses decrease, and income increases by P400k.

c. The amount of investment is decreased by P400k without affecting net income.

Problem 2

Tom Corp. gathered the following data relative to Northern Division's performance:

Net sales P12M Costs and expenses 11M Ave. operating assets 5M Desired minimum (or imputed) rate

Of return established by management 15% Ave. industry rate of return 28% Income tax rate 40%

Compute the Northern Division's residual income.

Problem 3

Great Flowers Holdings, Inc., has two independent divisions, Asian Enterprises and Malayan Corp. Asian Ent. Produces product "Cute"of which Malayan Corp. buys from an external supplier at P80 per piece. The relevant production data of Asian Ent. Is as follows:

Variable prod costs P66

Allocated factory overhead 15

Required: Determine the profit for Asian Ent., Malayan Corp, and Great Flower Holdings, Inc. if an inter- divisional transfer of goods occurred under each of the following transfer prices:

1. Market price of P80.

2. Variable prod cost of P66

3. Negotiated price of P73

4. Dual pricing.