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 Roys margin for 2021.

2. Compute Roys turnover for 2021.

3. Compute Roys ROI for 2021.

4. Recompute Roys 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 Divisions 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%

Required:

Compute the Northern Divisions residual income.

Problem 3

Great Flowers Holdings, Inc., has two independent divisions, Asian Enterprises and Malayan Corp. Asian Ent. Produces product Cuteof 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 interdivisional 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