Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 60 Variable cost per unit $ 45 $8 20,000 Fixed costs per unit (based on capacity) Capacity in units Division B could use Division A's product as a component part in the manufacture of 4,000 units its own newly-designed product. Division B has received a quote of $59 from an outside supplier for a component part that is comparable to the one that Division A makes. Also assume that the company's divisional managers are evaluated based on their division's profits and that Division A is currently selling 17,000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and Division B purchases 4,000 component parts from an outside supplier, what would be the effect on the company's profits?

Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 60 Variable cost per unit $ 45 $8 20,000 Fixed costs per unit (based on capacity) Capacity in units Division B could use Division A's product as a component part in the manufacture of 4,000 units its own newly-designed product. Division B has received a quote of $59 from an outside supplier for a component part that is comparable to the one that Division A makes. Also assume that the company's divisional managers are evaluated based on their division's profits and that Division A is currently selling 17,000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and Division B purchases 4,000 component parts from an outside supplier, what would be the effect on the company's profits?

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter21: Variable Costing For Management analysis

Section: Chapter Questions

Problem 12E: Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the...

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Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Capacity in units Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes. If the company's divisional managers are evaluated based on their division's profits and Division A is currently selling 15,000 units on the outside market. what is Division B's highest acceptable transfer price if it were to buy 4,000 units from Division A? Multiple Choice $48 $52 $ 60 $ 44 $8 20,000 O $44 $58
A company has two divisions, East and West. The East Division has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) Variable cost per unit 2$ 60 43 Fixed costs per unit (based on capacity) 2$ 8 40 Capacity in units 20,000 The West Division could use the product produced by East as a component part in the manufacture of 4,000 units of its own newly-designed product. West has received a quote of $59 from an outside supplier for a component part that is comparable to the one that East makes. Also assume that the company's divisional managers are evaluated based on their division's profits and that the East Division is currently selling 17,000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and the West Division purchases 4,000 component parts from an outside supplier, what would be the effect on the company's overall profits?…
Assume a company has two divisions, Division C and Division D. Division C has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 60 Variable cost per unit $ 44 Fixed costs per unit (based on capacity) $ 8 Capacity in units 20,000 Division D could use Division C’s product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division D has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division C makes. If the company’s divisional managers are evaluated based on their division’s profits and Division C is currently selling 15,000 units on the outside market, what is Division C’s lowest acceptable transfer price if it were to sell 4,000 units to Division D?
Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 60 Variable cost per unit $ 43 Fixed costs per unit (based on capacity) $ 8 Capacity in units 20,000 Division B could use Division A’s product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $60 from an outside supplier for a component part that is comparable to the one that Division A makes. Also assume that the company’s divisional managers are evaluated based on their division’s profits and that Division A is currently selling 17,000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and Division B purchases 4,000 component parts from an outside supplier, what would be the effect on the company’s profits?
Assume a company has two divisions, Division B and Division C. Division B has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 60 Variable cost per unit $ 44 Fixed costs per unit (based on capacity) $ 8 Capacity in units 20,000 Division C could use Division B’s product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division C has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division B makes. If the company’s divisional managers are evaluated based on their division’s profits and Division B is currently selling 15,000 units on the outside market, what is Division C’s highest acceptable transfer price if it were to buy 4,000 units from Division B? Multiple Choice $48 $52 $44 $58
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Scottsdale Manufacturing is organized into two divisions: Fabrication and Assembly. Components transferred between the two divisions are recorded at a predetermined transfer price. Standard variable manufacturing cost per unit in the Fabrication Division is $350. At the present time, this division is working to capacity. Fabrication estimates that the units it produces could be sold on the external market for $580. The product under consideration is viewed as a commodity-type product, with no differentiating features or characteristics. Required: 2. Based on the general transfer pricing rule presented in the chapter, what is the minimum transfer price between units when the Fabrication Division is working to capacity? 3. What if the Fabrication Division had excess capacity? How would this change the minimum transfer price as determined by the application of the general transfer pricing rule?
Division A of SLG Company produces a part it sells to other companies. Sales and cost data for the part are as follows: Capacity in units 60,000 units Selling price per unit O $27 per unit O $39 per unit O $36 per unit O $41 per unit Variable cost per unit O None of the above. Fixed cost per unit at capacity Division B, another division of SLG Company, would like to buy this part from Division A. Division B is currently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs can be avoided. Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs and without interfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer price from the perspective of Division A? $40 per unit $28 per unit $9 per unit
A company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Capacity in units Multiple Choice $ $ Profits would decrease by $77,000 $ Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $63 from an outside supplier for a component part that is comparable to the one that Division A makes. Profits would decrease by $69,000 60 41 8 Also assume that the company's divisional managers are evaluated based on their division's profits and that Division A is currently selling 17,000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and Division B purchases 4,000 component parts from an outside supplier,…
Tesh, Inc., manufactures and sells two products: Product P9 and Product I9. Data concerning the expected production of each product and the expected total direct labour-hours (DLHs) required to produce that output appear below: Expected Production Direct Labour-Hours Per Unit Total Direct Labour-Hours Product P9 200 7.0 1,400 Product I9 400 6.0 2,400 Total direct labour-hours 3,800 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product P9 Product I9 Labour-related DLHs $71,136 1,400 2,400 Machine setups setups 42,880 300 200 General factory MHs 406,620 4,200 3,900 $520,636 The activity rate for the Machine setups activity cost pool under activity-based costing is closest to: a. $1,041.27 per setup b. $85.76 per setup c. $214.40 per setup d.…