The Valve Division of Industrial Company produces a small valve that is used by various companies as a component part in their products. Industrial Company operates its divisions as autonomous units, giving its divisional manager great discretion in pricing and other decisions. Each division is expected to generate a rate of return of at least 14 percent on its operating assets. The Valve Division has average operating assets of P700,000. The valves are sold for P5 each. Variable costs are P3 per valve, and fixed costs total P462,000 per year. The Division has a capacity of 300,000 units. How many valves must the Valve Division sell each year to generate the desired rate of return on its assets?

The Valve Division of Industrial Company produces a small valve that is used by various companies as a component part in their products. Industrial Company operates its divisions as autonomous units, giving its divisional manager great discretion in pricing and other decisions. Each division is expected to generate a rate of return of at least 14 percent on its operating assets. The Valve Division has average operating assets of P700,000. The valves are sold for P5 each. Variable costs are P3 per valve, and fixed costs total P462,000 per year. The Division has a capacity of 300,000 units. How many valves must the Valve Division sell each year to generate the desired rate of return on its assets?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...

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