Minden Manufacturing Company is evaluating the results of two divisions: Management expects each division to earn a 25% return on assets.

Module 9: Minden Manufacturing Company


CRITICAL THINKING ASSIGNMENT (100 points): Decentralized Operations
Complete the following questions using Microsoft Excel. No other submission format is allowed.
Review the grading rubric to confirm you are meeting the assignment requirements. (All amounts in
SAR unless otherwise indicated.)

Problem 1
Minden Manufacturing Company is evaluating the results of two divisions:
Eastern Western
Division Division
Sales 40,000,000 72,000,000
Operating income 4,000,000 6,480,000
Total Assets 20,000,000 18,000,000
Management expects each division to earn a 25% return on assets.

Required:
a. Calculate profit margin for each division.
b. Calculate investment turnover for each division.
c. Calculate Return on Investment using the DuPont Formula.
d. Calculate residual income for each division.
You must show all your work for credit.

Module 10


CRITICAL THINKING ASSIGNMENT (120 points): Differential Analysis
There are four problems for this module’s Critical Thinking Assignment.
Complete the following questions using Microsoft Excel. No other submission format is allowed.
Review the grading rubric to confirm you are meeting the assignment requirements. (All amounts in
SAR unless otherwise indicated.)

Problem 1
Kassel Corporation is considering trading a truck with a book value of SAR 80,000 with an estimated
five-year life for a new truck that would cost SAR 200,000. The old truck could be sold for SAR 75,000.
The new truck has a seven-year life with no residual value. The new truck would reduce annual
operating costs by SAR 20,200 per year.

Required:
Prepare a differential analysis on whether to continue with the old machine (Alternative 1) or purchase
the new machine (Alternative 2).

Problem 2
A condensed income statement by product line for Brion Sporting Goods indicated the following for
Baseball Equipment for the past year:
(All amounts in SAR)
Sales 5,600,000
Cost of goods sold 3,800,000
Gross profit 1,800,000
Operating expenses 1,950,000
Loss from operations (150,000)
It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs, and that 20%
of the operating expenses are fixed. Because Almond Cookies is only one of the many products, the
fixed costs will not be materially affected if the product is discontinued.

Required:
Prepare a differential analysis to determine whether Baseball Equipment should be continued
(Alternative 1) or discontinued (Alternative 2). Should Baseball Equipment be retained? Explain and
indicate the dollar difference in favor or against.

Problem 3
Marburg Manufacturing produces various-sized plastic panels for its main product. The manufacturing
cost for small bottles is SAR 210 per unit, including fixed costs of SAR 65 per unit. A proposal is offered
to purchase plastic panels from an outside source for SAR 185 per unit, plus SAR 7 per unit for freight.
Required:
Prepare a differential analysis to determine whether the company should make (Alternative 1) or buy
(Alternative 2) for bottles, assuming fixed costs are not affected by the decision.

Problem 4
Whole milk is produced for SAR 18 per gallon. Whole milk can be sold without additional processing for
SAR 25 per gallon or processed further into ice cream at an additional cost of SAR 9 per gallon. Ice
cream can be sold for SAR 32 per gallon.
Required:
Prepare a differential analysis on whether to sell whole milk (Alternative 1), or process further into ice
cream (Alternative 2).
You must show all your work for credit.

Module 12


CRITICAL THINKING ASSIGNMENT (120 points):
Complete the following questions using Microsoft Excel. No other submission format is allowed.
Review the grading rubric to confirm you are meeting the assignment requirements.
Paderborn Industries is considering two investment projects. The estimated cash flow in SARs for each
project is as follows:
Year
Plant
Expansion
(8,000,000)
Retail Store
Expansion
(8,000,000)
1 2,100,000 3,040,000
2 2,100,000 2,710,000
3 2,100,000 2,060,000
4 2,100,000 1,750,000
5 2,100,000 940,000
The company has decided that the appropriate discount rate is: 10%
Required:

  1. Calculate the payback for each project (to 3 decimal points)
  2. Calculate the Net Present Value (NPV) for each project
  3. Calculate the Present Value Index (PI) for each project (round to 3 decimal places)
  4. Calculate the Internal Rate of Return (IRR) for each project (Round to 2 decimal places)
  5. Advise management on which, if either, project to pursue and why
    You must show all your work for credit.
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