IVY MBA Managerial Accounting – Final Prep Comprehensive Resource To Help You Ace Includes Frequently Tested Questions With ELABORATED 100% Correct COMPLETE SOLUTIONS Guaranteed Pass First Attempt!! Current Update!!

IVY MBA Managerial Accounting – Final Prep Comprehensive Resource To Help You Ace Includes Frequently Tested Questions With ELABORATED 100% Correct COMPLETE SOLUTIONS Guaranteed Pass First Attempt!! Current Update!! 1. Transfer price - ANSWER The price charged when one segment of a company provides goods or services to another segment of the company. 2. Objective of setting transfer prices - ANSWER To motivate managers to act in the best interests of the overall company. 3. Three primary approaches to setting transfer prices ANSWER a) Negotiated transfer prices b) Set transfer prices at cost c) Transfers at market price. 4. A company has a required rate of return of 15% and reports the following financial information: • Sales: $750,000 • Net Income: $100,000 • Beginning Operating Assets: $150,000 • Ending Operating Assets: $300,000 • Beginning Inventory: $50,000 • Ending Inventory: $75,000 • Beginning Fixed Assets: $200,000 • Ending Fixed Assets: $300,000 Using the Return on Investment (ROI) formula based on average operating assets, calculate the company’s ROI. Answer: ROI = 0.444 (44.4%) 5. Given the following financial information: • Required Return: 15% • Sales: $750,000 • Net Income: $100,000 • Beginning Operating Assets: $150,000 • Ending Operating Assets: $300,000 • Beginning Inventory: $50,000 • Ending Inventory: $75,000 • Beginning Fixed Assets: $200,000 • Ending Fixed Assets: $300,000 Required: Calculate the Net Margin. - ANSWER Net Margin = 0.13 (13%) 6. Given the following financial information: • Required Return: 15% • Sales: $750,000 • Net Income: $100,000 • Beginning Operating Assets: $150,000 • Ending Operating Assets: $300,000 • Beginning Inventory: $50,000 • Ending Inventory: $75,000 • Beginning Fixed Assets: $200,000 • Ending Fixed Assets: $300,000 Required: Calculate the Residual Income. - ANSWER Residual Income = $77,500 7. Required return: 15%, Sales $750,000, Net Income $100,000, Beginning Operating Assets $150,000, Ending Operating Assets $300,000, Beginning Inventory $50,000, Ending Inventory $75,000, Beginning Fixed Assets $200,000, Ending Fixed Assets $300,000. The CEO is considering a new project that adds $5,000 in residual income. Does he do it? - ANSWER Yes, adding more residual income is always a positive 8. Sister companies, Bike America and Target, are considering entering into an internal transfer arrangement. Bike America can supply high-quality bicycles to Target at a variable manufacturing cost of $150 per unit. Target currently has the option to purchase the same bicycles from an external supplier at a price of $170 per unit. Assuming Bike America has sufficient excess production capacity, determine the acceptable range of transfer prices between the two companies. - ANSWER Acceptable transfer price range: $150 – $170 9. Sister companies, Bike America and Target, are considering an internal transfer transaction. Bike America is capable of supplying 10,000 high-quality bicycles to Target. Bike America currently sells these bicycles to external customers at a price of $180 per unit, with a variable manufacturing cost of $150 per unit. Target, alternatively, can purchase the bicycles from an outside supplier for $170 per unit. Assume that Bike America would have to forgo 3,000 external sales in order to fulfill this internal transfer. Required: Determine the acceptable range of transfer prices between the two companies. - ANSWER Acceptable transfer price range: $159 – $175 10. What is a perpetual budget? - ANSWER A 12-month budget that continuously rolls forward.