If Farley plans to sell 1,200 units, what will be Farley’s operating leverage at this level ?… 1 answer below »

Selling price per table $1,500 Sales Commissions per table $100 Fixed Overhead Costs $180,000 Direct Material Cost per table $350 Direct Labor Cost per table $300 Sales Staff Salaries $100,000 Marketing Costs $50,000 Variable Overhead Cost per table $150 Other Administrative Costs $300,000
REQUIRED: If Farley plans to sell 1,200 units, what will be Farley’s operating leverage at this level of sales?
Refer to the original information: Assume that Farley believes they will sell 2,000 units and wants to earn a $400,000 profit, what must they set their selling price to earn a desired profit of $400,000?
Refer to the original information: Assume that Farley is currently earning a $210,000 profit on sales of 1,400 units. Farley would like to eliminate the sales staff salaries and pay its sales staff a commission only. What would Farley need to set as its commission per table if it wants to earn a $210,000 profit on sales of 1,400 units?
The following selected data pertain to the Dillon division of Jackson Sons Corporation for last year:
Sales…………………………………… $2,000,000
Average operating assets…………. $500,000 Net operating income………………. $100,000 Asset Turnover………………………. 4.0
Jackson Sons Corporation is a highly decentralized company and maintains a 15% minimum required return on investment (ROI) for its Divisions and the company as a whole.
This year the President of Jackson Sons Corporation presented a new investment project to the management of its Dillon Division. The proposed new investment would serve to launch a new product, would require additional investment of $50,000 in average annual assets and would increase net operating income by $8,000. Jackson Sons Corporation evaluates its divisional managers on the basis of ROI.
What is the ROI of the Dillon division before the new project?
What is the ROI of the new proposed product?
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Problem #2 (Continued)
What is the current Residual Income for the Dillon division (before acceptance of the project)?
What is the Residual Income for the Dillon division if the proposed project is undertaken?
Which method of evaluating the performance of its managers will most likely result in Dillon division accepting this project? Circle One.
ROI Residual Income Both will yield identical