Required: a. What is the profit for each division if the external demand per period for the components that are made by L Division is: i. 15,000 components ii. 19,000 components iii. 35,000 components b. Assuming G Division ignored the transfer pricing policy of the Group and purchased the 20,000 components for £170 externally, Calculate the financial impact on the Group taking into consideration the three levels of demand (15,000;19,000 and 35,000 components) c. Briefly explain Two attributes of a good transfer pricing policy.
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- PQ Group PQ Group comprises two divisions: P and Q. Division P manufactures a product which is transferred to Division Q, where it is converted into the final product for external sale. One unit of the intermediate product is used to make one unit of the final product. The costs of each division are as follows: P Division Q Division Variable cost per unit £2 £5* Fixed costs attributable to the product £2,000 £10,000 Maximum capacity 2,250 2,250 * excluding the cost of the transferred item Market research has produced the following information about possible levels of sales of the final product at a range of prices: Selling price (£) Sales (units) 25.00 1,500 23.50 1,750 22.00 2,000 20.50 2,250 The transfer price for the intermediate product has been set on a full cost-plus basis at £4. Complete the following statements for each Division: Division P Output (units) Revenue £ Variable costs £ Fixed…Question 3 Mesin Trade Sdn. Bhd. has two divisions: the 'Excel' and "Shine' divisions. Excel makes and supplies Component X to the Shine Division. The Shine Division buys Component X and converts it to the finished product, which it then sells to its extemal customers. Excel has no external customers for Component X. Expected sales of the finished product are as follows: www ww www Net selling Sales volumes price (RM): | (Units): 1,000 100 90 2,000 3,000 80 70 4,000 5,000 6,000 60 50 The optimal level of output for Mesin Trade Sdn. Bhd. has been determined at 5,000 units and the costs of each division are: www Excel Shine Variable cost per unit Fixed costs attributable to RM62,000 the products RM11.50 RM7.50 RM92,000 Based on a full cost plus mark-up policy, the transfer price of Component X has been set at RM30 per unit. Required: (a) Show computations supporting that at 5,000 units of output Mesin Trade Sdn. Bhd. will be able to maximize its profits. wwww (b) Using the above full…Exercise 11-47 (Algo) Net Realizable Value Method with By-Products (LO 11-7, 10) Butterfly Corp. manufactures products M1 and M2 from a joint process, which also yields a by-product, B1. Butterfly accounts for the revenues from its by-product sales as other income. Additional information follows: M1 24,400 ? M2 13,800 ? Joint cost of product M1 B1 9,600 ? Units produced Allocated joint costs Sales value at split-off $378,000 $252,000 $96,000 Total 47,800 $352,000 $726,000 Required: Assuming that joint product costs are allocated using the net realizable value at split-off approach, what was the joint cost allocated to product M1? (Do not round intermediate calculations.)
- Exercise 11-46 (Algo) Net Realizable Value Method with By-Products (LO 11-3, 5) Denver Fabricators manufactures products DF1 and DF2 from a joint process, which also yields a by-product, BP. The company accounts for the revenues from its by-product sales as other income. Additional information follows: Units produced Allocated joint costs Sales value at split-off DF1 DF2 BP DF1 27,200 ? $ 562,500 $ 187,500 Joint Cost DF2 18,200 ? BP 15,200 ? $ 102,200 Required: Assuming that joint product costs are allocated using the net realizable value at split-off approach, what joint costs are allocated to each of the joint products DF1 and DF2 and to the by-product, BP? Note: Do not round intermediate calculations. Total 60,600 $ 560,200 $ 852,2002. BZD Company manufactures products A and B from a joint process which also yields a by- product, X. BZD accounts for the revenues from its by-product sales as a deduction from the cost of goods sold of its main products. Additional information is as follows: A B X TOTAL Units produced 15,000 9,000 6,000 30,000 Joint costs ? ? ? P264,000 Sales value at split-off P290,000 P150,000 P 10,000 P450,000 Assuming that joint product costs are allocated using the relative sales value at split-off approach, what were the joint costs allocated to products A_____________________ B___________________ X__________________Problem 5 Ilang Ilang company manufactures Products A and B from a joint process which also yields a by-product. Ilang ilang accounts for the revenue from its by-product sales as a deduction from the cost of goods sold of its main products. Additional information follows: A B C Total Units produced 15,000 9,000 6,000 30,000 Joint Costs ? ? ? 264,000 Sales Value at Split off 290,000 150,000 10,000 450,000 Joint products are allocated using the relative sales value at split off approach What was the joint cost allocated to Product B?
- Item 3 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) $ 75 Variable cost per unit $ 59 Fixed costs per unit (based on capacity) $ 4 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 $58 from an outside supplier for a component part that is comparable to the one that Division A makes. If that the company’s divisional managers are evaluated based their division’s profits and Division A is currently selling 20,000 units on the outside market, what is lowest acceptable transfer price for Division A if it were to sell 4,000 units to Division B? Multiple Choice $79 $75 $73 $71Question Content Area In Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is as follows: Case 1 Case 2 Division A: Capacity in units 100,000 100,000 Number of units sold externally 100,000 60,000 Market selling price $90 $75 Variable costs per unit $73 $58 Fixed costs per unit based on capacity $10 $10 Division B: Number of units needed for production 40,000 40,000 Purchase price per unit from external supplier $86 $74 The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?General Transfer Pricing Rule 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 Divisionis $500. At the present time, this division is working to capacity. Fabrication estimates that the unitsit produces could be sold on the external market for $650. The product under consideration is viewedas a commodity-type product, with no differentiating features or characteristics.Required1. What roles are played by transfer prices? That is, why are transfer prices needed?2. Use the general transfer pricing rule presented in the chapter to determine an appropriate transfer price.Why is the amount you calculated considered an appropriate transfer price?3. What if the Fabrication Division had excess capacity? How would this change the indicated transferprice? Why is the amount you determined considered an…
- Exercise 15-32 (Algo) International Transfer Prices (LO 15-4) San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles them for sale. Manufacturing sells many components to third parties in addition to Assembly. Selected data from the two operations follow. Manufacturing Assembly Capacity (units) 402,000 202,000 Sales pricea $ 404 $ 1,310 Variable costsb $ 170 $ 484 Fixed costs $ 40,020,000 $ 24,020,000 a For Manufacturing, this is the price to third parties. b For Assembly, this does not include the transfer price paid to Manufacturing. Suppose Manufacturing is located in Country A with a tax rate of 70 percent and Assembly in Country B with a tax rate of 30 percent. All other facts remain the same. Required: a. Current production levels in Manufacturing are 202,000 units. Assembly requests an additional…Segment Reporting The XYZ Company produces and sells two products: The Riffs and The Raffs. Below is revenue and cost information to facilitate the development of a basic segmented income statement. Product Riffs Raffs Sales Price per unit $8.00 6.00 Variable Cost per unit $3.20 3.00 Traceable Fixed Costs $62,000 $44,000 It is expected that the company will incur $21,000 of common fixed expenses and unit sales are expected to be 12,000 of Riffs and 18,000 of Raffs. Required: Construct a Contribution Format Income Statement segmented by product line and company total.n each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Case A B Division X: Capacity in units 140,000 140,000 Number of units being sold to outside customers 140,000 115,000 Selling price per unit to outside customers $ 54 $ 38 Variable costs per unit $ 34 $ 20 Fixed costs per unit (based on capacity) $ 12 $ 10 Division Y: Number of units needed for production 25,000 25,000 Purchase price per unit now being paid to an outside supplier $ 50 $ 37 Required:1-a. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. 1-b. If the managers are free to negotiate and make decisions on their own, will…