9 9 Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing 24,000 units from an outside supplier for $14.00 per unit. Polk is currently operating at less than its full capacity of 620,000 units and has variable costs of $6.00 per unit. The full cost to manufacture the unit is $10. Polk currently sells 460,000 units at a selling price of $19 per unit. Required: a. What will be the effect on Avery Company's operating profit If the transfer is made internally? b. What is the minimum transfer price from Polk's perspective? c. What is the maximum transfer price from Bishop's perspective? Complete this question by entering your answers in the tabs below. 。 Required A Required B Required C What will be the effect on Avery Company's operating profit if the transfer is made internally?

9 9 Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing 24,000 units from an outside supplier for $14.00 per unit. Polk is currently operating at less than its full capacity of 620,000 units and has variable costs of $6.00 per unit. The full cost to manufacture the unit is $10. Polk currently sells 460,000 units at a selling price of $19 per unit. Required: a. What will be the effect on Avery Company's operating profit If the transfer is made internally? b. What is the minimum transfer price from Polk's perspective? c. What is the maximum transfer price from Bishop's perspective? Complete this question by entering your answers in the tabs below. 。 Required A Required B Required C What will be the effect on Avery Company's operating profit if the transfer is made internally?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Activity Cost Inspecting components (sampling only) $875,000 Reworking products (due to failed component) 6,920,000 Warranty work (due to failed component) 9,170,000 II. Supplier Data Manzer Inc. Buckner Company Unit purchase price $89 $86 Units purchased 800,000 3,200,000 Sampling hours* 80 3,920 Rework hours 360 5,640…
Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Activity Cost Inspecting components (sampling only) $685,000 Reworking products (due to failed component) 7,420,000 Warranty work (due to failed component) 10,270,000 II. Supplier Data Manzer Inc. Buckner Company Unit purchase price $89 $86 Units purchased 800,000 3,200,000 Sampling hours* 80 3,920 Rework hours 360…
Peppertree Company has two divisions, East and West. Division East manufactures a component that Division West uses. The variable cost to produce this component is $1.46 per unit; full cost is $2.00. The component sells on the open market for $5.03. Assuming Division East has excess capacity, what is the lowest price Division East will accept for the component? What is the highest price that Division West will pay for it? (Enter your answers in 2 decimal places.)