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.
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Decision on Transfer Pricing
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