True North Corporation has two divisions. The Mining division makes Toldine, which is then transferred to the Metals division.(Click the icon to view information about the two divisions.)The following table gives the manufacturing cost per unit in the Mining and Metals divisions for 2020:(Click the icon to view the manufacturing cost per unit in the mining and metals divisions.)Read the requirementsRequirement 1. Calculate the operating incomes for the Mining and Metals divisions for the 250,000120% of full manufacturing cost.(a) Begin by calculating the operating income for the mining division using market-based transfer priMining division:RevenuesCostsDivision variable costsDivision fixed costsTotal Division costsDivision operating incomeMore infoToldine is further processed by the Metals division and is sold to customers at aprice of $190 per unit. The Mining division is currently required by True North totransfer its total yearly output of 250,000 units of Toldine to the Metals division at120% of full manufacturing cost. Unlimited quantities of Toldine can be purchasedand sold on the outside market at $95 per unit.PrintDone- XRequirements1. Calculate the operating incomes for the Mining and Metals divisions for the250,000 units of Toldine transferred under the following transfer-pricingmethods: (a) market price and (b) 120% of full manufacturing cost.2. Which transfer-pricing method does the manager of the Mining division prefer?What arguments might he make to support this method?Data tablePrintDirect materials costDirect manufacturing labor costVariable manufacturing overhead costFixed manufacturing overhead costTotal manufacturing cost per unitPrintDoneMiningDivision$$DoneMetalsDivision14 $24132980 $1229151268- X

A financial metric called operating income, sometimes referred to as operating profit or operating…

1. Calculate the operating incomes for the Mining and Metals divisions for th 250,000 units of Toldine transferred under the following transfer-pricing methods: (a) market price and (b) 120% of full manufacturing cost. 2. Which transfer-pricing method does the manager of the Mining division pr What arguments might he make to support this method?

1. Calculate the operating incomes for the Mining and Metals divisions for th 250,000 units of Toldine transferred under the following transfer-pricing methods: (a) market price and (b) 120% of full manufacturing cost. 2. Which transfer-pricing method does the manager of the Mining division pr What arguments might he make to support this method?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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D1.
The materials used by Hibiscus Company Division A are currently purchased from outside supplier at $53 per unit. Division B is able to supply Division A with 12,400 units at a variable cost of $47 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 12,400 units. (a) By how much will each division's income increase as a result of this transfer? Enter an increase as a positive number and a decrease as a negative number. Division A $fill in the blank 1 Division B $fill in the blank 2 (b) What is the total increase in income for Hibiscus Company? $fill in the blank 3
2. The Gustavo Industries in São Paulo, Brazil, reported the following results for 2020 (currency in Brazilian real, R$):« Sales R$ 400,000,000- 320,000,000- 40,800,000- 280,000,000- Variable costs Controllable fixed costs Average operating assets Gustavo's Management is considering the following independent courses of action in 2021 in order to maximize the return on investment for this division: Option1: Reduce average operating assets by R$ 80,000,000 with no change in controllable margin. Option2: Increase sales R$ 80,000,000 with no change in the contribution margin percentage. A. Compute the controllable margin and the return on investment for 2020. (25%)- B. Compute the controllable margin and the expected return on investment for each proposed option. (25%)-
What would be the total contribution to profit to the company as a whole for 10,000 units transferred to Division B and later sold to outside customers at P21 per unit. A. P20,000 B. P40,000 C. (P20,000) D. P80,000
4. If a transfer price of $340 per unit is negotiated, how much would the income from operations of each division and total company income from operations increase? The Semiconductors Division's income from operations would increase by$fill in the blank 75932002afef041_1 The Navigational Systems Division's income from operations would increase by$fill in the blank 75932002afef041_2 Exoplex Industries Inc.'s total income from operations would increase by$fill in the blank 75932002afef041_3 5a. What is the range of possible negotiated transfer prices that would be acceptable for Exoplex Industries Inc.? Any transfer price than the Semiconductors Division’s variable expenses per unit but than the market price would be acceptable. 5b. Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the transfer price?$fill in the blank 75932002afef041_6
Decision on Transfer Pricing
ats Assume a company has three products-A, B, and C-that emerge from a joint process. The joint processing costs that are incurred up to the split-off point equal $1,200,000. The selling prices and outputs for each product at the split-off point are as follows: Product A B С Selling Price $33 per pound $29 per pound $24 per pound Product A B C Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: Output 14,000 pounds 18,000 pounds 19,000 pounds Additional Processing Costs $65,000 $72,000 $88,000 Selling Price $37 per pound $34 per pound $30 per pound The company is trying to decide whether to retain or discontinue the entire joint manufacturing process. What is the financial advantage (disadvantage) of continuing to operate the entire joint manufacturing process?