Q1. Karim Corporation is considering two alternatives that are code-named A and B. Costs associated...
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Q1. Karim Corporation is considering two alternatives that are code-named A and B. Costs associated with the alternatives are listed below:
Alternative A
Alternative B
Supplies costs
SAR 33 000
SAR 33 000
Assembly costs
SAR 48 000
SAR 51 000
Power costs
SAR 32 000
SAR 22 000
Inspection costs
SAR 11 000
SAR 27 000
Required: a. Which costs are relevant and which are not relevant in the choice between these two alternatives? b. What is the differential cost between the two alternatives?
Q.2 Karim Industries is a division of a major corporation. Last year the division had total sales of SAR 43,380,000, net operating income of SAR 4,828,980, and average operating assets of SAR 9,000,000. The company's minimum required rate of return is 12%.
Required: a. What is the division's margin? b. What is the division's turnover? c. What is the division's return on investment (ROI)?
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