Category > AccountingPosted 23 Dec 2017My Price10.00
type of flower must the company sell to break even
Please complete Questions #3 and #4 of the assignment. Show all necessary calculations and work. When asked for a qualitative response, provide detailed answers.
Name Student # Tutorial # Grade /20 Due 27-Mar-2015 Bonus Assignment. You must submit in the tutorial which you are registered in. 1. Vernal Florists sells premium flowers for wedding planners. Total relevant fixed costs are $29,400,000. The income tax rate is 13.7%. Their controller has provided you projected data: Morning Glory Jasmine Honeysuckle Forecasted volume (units) 10,000 18,000 12,000 Expected sales mix in units 25% 45% 30% Selling Price $200 $700 $800 Variable Costs 75 250 300 How many of each type of flower must the company sell to break even? (4 marks) 2. Dairy King has two ice cream divisions, Lucerna and Saputoh. Lucerna sells standard packages while Saputoh sells custom orders. Occasionally transferring is possible. Saputoh currently purchases 10,000 standard packages per year externally at $37 per package to further process. Dairy King evaluates managers based on divisional profits. The following financials concern Lucerna division. (4 marks) External selling price per package: $46 Fixed costs per package (based on capacity): $9 Variable cost per package: $26 Capacity in packages processing: 60,000 Assume that Lucerna Division now sells only 50,000 package each year to outside customers. For Lucerna, what is the lowest acceptable transfer price for the sale? For Saputoh, what is the highest acceptable transfer price to acquire? Is there any room for negotiation? What relevant prices would you expect? For the entire company, should a transfer take place? If not, why? Assume that Lucerna Division now sells to outside customers all packages it can produce. For Lucerna, what is the lowest acceptable transfer price for the sale? For Saputoh, what is the highest acceptable transfer price to acquire? Is there any room for negotiation? What relevant prices would you expect? For the entire company, should a transfer take place? If not, explain why? 3. Assume they both negotiated and transferred, and compiled the following financials. (2 marks) Lucerna Saputoh Lucerna Saputoh Sales (incl. other prdts) $4 500 000 $6 300 000 Operating income $372 000 $336 000 Avg total operating assets $2 810 000 $2 440 000 Net PPE $950 000 $800 000 Compute the rate of return for each division using the return on investment (ROI) performance measure. Compute residual income for each division assuming the required rate of return is 13%.
