Directions: Answer all five questions. Please submit your work in Word or PDF formats only. You can submit an Excel file to support calculations, but please "cut and paste" your solutions into the Word or PDF file. Be sure to show how you did your calculations
Question #1
a) What is a "transfer price?"
b) List and describe 3 main reasons for using transfer prices.
Question #2
Consider the following information about a potential project:
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Investment required
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$3,000,000
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Expected annual project revenue
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$6,000,000
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Expected annual project expenses
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$5,550,000
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|
Required rate of return
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11%
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Current division return on investment
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18%
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a) Calculate the project's return on investment.
b) Based solely on ROI, is this project in the firm's best interests? Why or why not?
c) Is this project in the division manager's best interests? Why or why not?
d) Perform DuPont Analysis on this project.
e) What is the project's residual income?
Question #3
List and describe five traits that can differentiate a customer that is relatively inexpensive to service from a customer that is relatively expensive to service.
Question #4
List and describe five actions a firm can take if a customer appears to be unprofitable.
Question #5
Consider the following quality cost report:
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Q1
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Q2
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Q3
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Q4
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Prevention costs
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$530
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$825
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$775
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$650
|
|
Appraisal costs
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$430
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$475
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$420
|
$360
|
|
Internal failure costs
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$620
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$550
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$450
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$350
|
|
External failure costs
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$875
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$725
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$500
|
$350
|
|
Total quality costs
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$2,455
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$2,575
|
$2,145
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$1,710
|
|
Total revenues
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$55,000
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$56,000
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$65,000
|
$66,000
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Do you believe this firm's quality initiatives have been successful? Be sure to justify your opinion with specific information.