10.17 Krafts, Inc. uses the decentralized form of organization and considers each of its divisions as an investment center. Division A is currently selling 30,000 units of Part X annually, although it has sufficient production capacity to produce 42,000 parts per year. Variable manufacturing costs amount to P36 per part, while the total fixed costs amount to P180,000. These 30,000 parts are sold to outside market at P76 per part. Division S, also a part of the Krafts, Inc., has indicated that they would like to get from Division A 3,000 parts at a price of P74. Per part because they presently buying the parts from the outside supplier at that price. Assume that Division A could sell the entire 42,000 parts to outside market. What is the effect on the overall operating income of Krafts, Inc. if Division A will be required by the top management to sell 3,000 parts to Division S at a price of а. Р36 b. P74
10.17 Krafts, Inc. uses the decentralized form of organization and considers each of its divisions as an investment center. Division A is currently selling 30,000 units of Part X annually, although it has sufficient production capacity to produce 42,000 parts per year. Variable manufacturing costs amount to P36 per part, while the total fixed costs amount to P180,000. These 30,000 parts are sold to outside market at P76 per part. Division S, also a part of the Krafts, Inc., has indicated that they would like to get from Division A 3,000 parts at a price of P74. Per part because they presently buying the parts from the outside supplier at that price. Assume that Division A could sell the entire 42,000 parts to outside market. What is the effect on the overall operating income of Krafts, Inc. if Division A will be required by the top management to sell 3,000 parts to Division S at a price of а. Р36 b. P74
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Question
100%
Please Answer the Question Given in the picture
Provide a Complete answer. Thnak You
Transcribed Image Text:10.17
Krafts, Inc. uses the decentralized form of organization and considers each of its
divisions as an investment center. Division A is currently selling 30,000 units of Part X
annually, although it has sufficient production capacity to produce 42,000 parts per year.
Variable manufacturing costs amount to P36 per part, while the total fixed costs amount to
P180,000. These 30,000 parts are sold to outside market at P76 per part.
Division S, also a part of the Krafts, Inc., has indicated that they would like to get from
Division A 3,000 parts at a price of P74. Per part because they presently buying the parts from
the outside supplier at that price.
Assume that Division A could sell the entire 42,000 parts to outside market. What is the
effect on the overall operating income of Krafts, Inc. if Division A will be required by the top
management to sell 3,000 parts to Division S at a price of
a. P36
b. P74
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education