QUESTION1 :

QUESTION 2:

QUESTION 3:

Elway Company provided the following income statement for the last year: Sales $893,870,000 Less: Variable expenses 551,163,000 Contribution margin $342,707,000 Less: Fixed expenses 195,917,000 Operating income $146,790,000 At the beginning of last year, Elway had $38,679,000 in operating assets. At the end of the year, Elway had $41,333,000 in operating assets. Required: 1. Compute average operating assets. $ 59,342,500 x 2. Compute the margin (as a percent) and turnover ratios for last year. If required, round your answers to two decimal places. Margin 16.42% Turnover 15.06 3. Compute ROI as a percent. Use the part 2 final answers in these calculations and round the final answer to two decimal places. % 4. ROI measures a company's ability to generate relative to its investment in assets. The greater the ROI, the efficiently the company is generating from its assets. 5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company). 1. Elway Company might be a service organization with relatively few physical assets required to generate its sales revenue and income. ROI will be higher when the factors that create a company's sales or income are not formally recognized as assets (e.g. human talent), 2. Elway Company might be a service organization with relatively few physical assets required and generates an income much higher than any manufacturing organization. ROI will be higher when the factors that create a company's sales income are not formally recognized as assets (e.g. human talent). 3. Elway Company might be a service organization with relatively few physical assets required and generates an income much higher than any manufacturing organization. ROI will be higher when the factors that create a company's sales or income are not formally recognized as assets (e.g. goodwill). Trimble Crane, Inc. has a number of divisions, including the Palm Division, a producer of hydraulic pumps, and Acer Division, a manufacturer of motors. Palm Division produces the h20-model pump that can be used by Acer Division in the production of motors that regulate the raising and lowering of the motor's crane derrick. The market price of the h20-model is $714, and the full cost of the h20-model is $540. Required: 1. If Trimble Crane has a transfer pricing policy that requires transfer at full cost: What will the transfer price be? 540 Do you suppose that Palm and Acer divisions will choose to transfer at that price? Acer Division chooses to transfer Palm Division refuses to transfer 2. If Trimble Crane has a transfer pricing policy that requires transfer at market price: What would the transfer price be? s 714 Do you suppose that Palm and Acer divisions would choose transfer at that price? Acer Division chooses to transfer Palm Division chooses to transfer 3. Now suppose that Trimble Crane allows negotiated transfer pricing and that Palm Division can avoid $120 of selling expense by selling to Acer Division. Which division sets the minimum transfer price? Palm Division What is the minimum transfer price? Which division sets the maximum transfer price? Acer Division What is the maximum transfer price? $ Do you suppose that Palm and Acer divisions would choose to transfer somewhere in the bargaining range? Yes Teslum Inc. has a number of divisions, including the Machina Division, a producer of high-end espresso makers, and the Java Division, a chain of coffee shops. Machina Division produces the EXP-100 model espresso maker that can be used by Java Division to create various coffee drinks. The market price of the EXP-10 is $475. Required: 1. If Teslum has a transfer pricing policy that requires transfer at full cost, what will the transfer price be? 475 Do you suppose that Machina and Java divisions will choose to transfer at that price? Machina Division would Java Division would 2. If Teslum has a transfer pricing policy that requires transfer at market price, what would the transfer price be? 950 Do you suppose that Machina and Java divisions would choose to transfer at that price? Machina Division would be willing to transfer Java Division would not be willing to transfer X 3. Now suppose that Teslum allows negotiated transfer pricing and that Machina Division can avoid $135 of selling expense by selling to Java Division. Which division sets the minimum transfer price? Machina Division X What is the minimum transfer price? 340