Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below:

	Division
	Queensland	New South Wales
Sales	$ 936,000	$ 1,972,000
Average operating assets	$ 520,000	$ 580,000
Net operating income	$ 98,280	$ 147,900
Property, plant, and equipment (net)	$ 249,000	$ 199,000

Required:

Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover.
Which divisional manager seems to be doing the better job?

Juniper Design Limited of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $430,000 on sales of $1,700,000. The company’s average operating assets for the year were $1,900,000 and its minimum required rate of return was 12%.

Required:

Compute the company’s residual income for the year.

Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $35 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows:

	Per Unit	22,000 Units Per Year
Direct materials	$ 15	$ 330,000
Direct labor	8	176,000
Variable manufacturing overhead	3	66,000
Fixed manufacturing overhead, traceable	3*	66,000
Fixed manufacturing overhead, allocated	6	132,000
Total cost	$ 35	$ 770,000

*One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).

Required:

If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 22,000 carburetors from the outside supplier?
Should the outside supplier’s offer be accepted?
Suppose if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product with a segment margin of $220,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 22,000 carburetors from the outside supplier?
Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?

Imperial Jewelers manufactures and sells a gold bracelet for $406.00. The company’s accounting system says the unit product cost for this bracelet is $267.00, as shown below:

Direct materials	$ 146
Direct labor	87
Manufacturing overhead	34
Unit product cost	$ 267

A wedding party has approached Imperial Jewelers about buying 20 gold bracelets for the discounted price of $366.00 each. The wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $8. Imperial Jewelers would have to buy a special tool for $467 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed.

To analyze this special order, Imperial Jewelers determined most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $9.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party’s order using existing manufacturing capacity.

Required:

What is the financial advantage (disadvantage) of accepting the wedding party’s special order?
Should the company accept the special order?

Wexpro, Incorporated, produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $78,000 per ton, one-fourth of which is allocated to product X15. Eight thousand four hundred units of product X15 are produced from each ton of clypton. The units can be either sold at the split-off point for $10 each or processed further at a total cost of $6,000 and then sold for $13 each.

Required:

What is the financial advantage (disadvantage) of further processing product X15?
Should product X15 be processed further or sold at the split-off point?