【正文】 However, Fred might argue that the true objective of the firm is to encourage and reward high return on investment. He may be able to develop an acceptably high ROI project in the next eight to 10 months. Thus, not accepting the immediate project may give him the ability to invest in a more profitable project later on. CYBER RESEARCH CASE 230 10–22 Answers will vary. 。 that is, what are her prospects for making partner at the public accounting firm? 221 PROBLEMS 10–14 1. Since the Transistor Division can sell all its transistors to the outside petitive market, the minimum transfer price is $. The Systems Division can buy its transistors from the outside market at $, so the maximum transfer price is $. 2. Yes, since the minimum transfer price for the idle capacity is $ ($ less the $ of allocated fixed overhead). The Division is better off if the transfer price is greater than $ for the excess capacity. 3. The negotiated price of $ provides profit for both the Board Division and the Systems Division. The Board Division realizes a profit of $ per board ($ – $). The Systems Division realizes a reduction in cost of $ per board ($ – $). It should be noted that the $ is not a true market price because this particular board is not sold externally. Thus, the Board Division is not necessarily foregoing profit by not selling externally at its regular markup. 10–15 1. Reigis Steel Company Unit Contribution Margin (in thousands except for unit contribution margin) For the Year Ended November 30, 2020 Sales ........................................................... $ 25,000 Less variable costs: Cost of goods sold ............................... $16,500 Selling expenses ($2,700 40%) ........... 1,080 17,580 Contribution margin .................................... $ 7,420 Unit contribution margin = $7,420/1,484 units = $ per unit 2. a. ROI = Ine before taxes/Average operating assets* = $1,845,000/$15,375,000 = 12% *Average operating assets = ($15,750,000 + 15,000,000)/2 = $15,375,000 222 Where November 30, 2020 operating assets = $15,750,000/ 223 10–15 Concluded b. Residual ine = $1,845,000 – ( $15,375,000) = $1,845,000 – $1,691,250 = $153,750 3. The management of Reigis Steel would have been more likely to accept the contemplated capital acquisition if residual ine were used as the performance measure because the investment would have increased both the division’s residual ine and the management bonuses. Using residual ine, management would accept all investments with a return higher than 11% as these investments would all increase the dollar value of residual ine. When using ROI as a performance measure, Reigis’s management is likely to reject any investment that would lower the overall ROI (12% in 2020), even though the return is higher than the required minimum, as this would lower bonuses. 4. Reigis must be able to control all items related to profits and investment if it is to be evaluated fairly as an investment center using either ROI or residual ine as performance measures. Reigis must control all elements of the business except the cost of invested capital, that being controlled by Raddington Industries. 10–16 1. Part 4CM Model 7AC Company Sales .................................. $ 70,000* $ 550,000 $ 620,000 Variable expenses .............. 50,000 460,000 510,000 Contribution margin...... $ 20,000 $ 90,000 $110,000 *While all 10,000 units could be sold externally, currently none are. 2. The transfer price should be the market price of $12. This is the minimum price for the Components Division and the maximum price for the Small AC Division. 3. Unless the manager of the Small AC Division is able to increase the price of Model 7AC, he will discontinue production and will not purchase any of the ponent. (The cost of producing the window unit will increase from $52 to $57, a cost greater than the current selling price.) 4. All 10,000 units of Part 4CM will be sold externally at the market price of $12 per unit. 224 10–16 Concluded 5. Sales ..................................... $ 120,000 Variable expenses ................. 50,000 Contribution margin......... $ 70,000 The contribution to profits increases by $20,000. The CEO made the correct decision. 10–17 1. Raymond should not reduce the price charged to Brandi if he can sell all he produces at a price of $ per pound. Brandi should buy externally, saving the pany $50,000 (100,000 $). The $50,000 savings belongs to the Donut Shop Division. There will be no effect on the Coffee Division. 2. Coffee Division: Current profit: 950,000 ($ – $) = $950,000 Profit with no internal transfers: 850,000 ($ – $) = $850,000 Change in profit = $950,000 – $850,000 = ($100,000) Donut Shop Division: Increase in profit: ($ – $) 100,000 = $50,000 Effect on firm: ($100,000) + $50,000 = ($50,000) 3. Using the no transfer scenario as the point of reference, the minimum transfer price for the Coffee Division can be puted as follows (if internal transfer oc