## 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:

- Calculate the payback for each project (to 3 decimal points)
- Calculate the Net Present Value (NPV) for each project
- Calculate the Present Value Index (PI) for each project (round to 3 decimal places)
- Calculate the Internal Rate of Return (IRR) for each project (Round to 2 decimal places)
- Advise management on which, if either, project to pursue and why

You must show all your work for credit.