Determine a transfer price for mmc using the general rule

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Reference no: EM131339964

Milwaukee Metallurgy Corporation (MMC) has two divisions. The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price.

The Fabrication Division's standard variable production cost per unit is $475. The division has no excess capacity, and it could sell all of its components to outside buyers at $620 per unit in a perfectly competitive market.

Question #1

1. Required information

Required:

1. Determine a transfer price for MMC using the general rule. Transfer price sheet is drawn here References eBook & Resources

ExerciseDifficulty: EasyLearning Objective: 13-06 Use the general economic rule to set an optimal transfer price.

Question #2

2. Required information

2. What would be the transfer price if the Fabrication Division had excess capacity? [The following information applies to the questions displayed below.] The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended. Sales revenue £ 6,050,000 Cost of goods sold 2,947,000 Operating expenses 2,921,500 Average invested capital 3,025,000 £ denotes the British pound sterling, the national monetary unit of the United Kingdom. Although the euro is used in most European markets, the U.K. continues to use pounds sterling for its national currency.

Question #3

3. Required information Required:

1. Compute the company's sales margin, capital turnover, and ROI. Sales margin % Capital turnover ROI % sheet is drawn here References eBook & Resources

ExerciseLearning Objective: 13-02 Compute an investment centers return on investment (ROI), residual income (RI), and economic value added (EVA).

Difficulty: EasyLearning Objective: 13-03 Explain how a manager can improve ROI by increasing either the sales margin or capital turnover. Check my work

Question #4

4. value: 10.00 points Required information

2. If the sales and average invested capital remain the same during the next year, to what level would total expenses have to be reduced in order to improve the firm's ROI to 10 percent?

Total expenses must be reduced to sheet is drawn here References eBook & Resources

ExerciseLearning Objective: 13-02 Compute an investment centers return on investment (ROI), residual income (RI), and economic value added (EVA).

Difficulty: EasyLearning Objective: 13-03 Explain how a manager can improve ROI by increasing either the sales margin or capital turnover. Check my work

Question #5

5. value: 10.00 points Required information

3-a. Assuming that the expenses and cost of goods sold are reduced in order to improve the firm's ROI to 10 percent, compute the firm's new sales margin. (Round your "Percentage" answer to 2 decimal places. (i.e., .1234 should be entered as 12.34)) New sales margin % sheet is drawn here 3-b.

Show how the new sales margin and the old capital turnover together result in a new ROI of 10 percent. (Round your "Percentage" answer to 2 decimal places. (i.e., .1234 should be entered as 12.34))

Verified Expert

The task consisted of four parts. The attachment of questions that was provided was jumbled so, firstly the questions were sorted in a comprehensible manner. After that, the questions were answered on transfer pricing was answered using the standard formula. The required sales margin ratio, capital turnover ratio and ROI were calculated for the second part. The third part consisted of ROI and other computations that were made according to the requirements.

Reference no: EM131339964

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