A Japanese Soft-drink Company is planning to establish a subsidiary company in Huston to produce mineral water. Based on the estimated annual sales of 40,000 bottles of mineral water cost studies produced the following estimates for Huston subsidiary : Total Annual costs($) Variable Cost as % of total annual cost (%) Material 2,10,000 100 Labour 1,50,000 80 Factory Overheads 92,000 60 Administration Overheads 40,000 35 The Houstonian production will be sold by manufacturer's representatives who will receive a - commission of 8% of the sale price. No portion of the Japanese office expenses is to be allocated to the Indian subsidiary. You are required to: (1) Compute the sale price per bottle to enable to management to realise an estimated 10% profit on sale proceeds in Huston. Calculate the break-even point in rupee sales on the assumption that the sale price per bottle is $ 14. (1I)

A Japanese Soft-drink Company is planning to establish a subsidiary company in Huston to produce mineral water. Based on the estimated annual sales of 40,000 bottles of mineral water cost studies produced the following estimates for Huston subsidiary : Total Annual costs($) Variable Cost as % of total annual cost (%) Material 2,10,000 100 Labour 1,50,000 80 Factory Overheads 92,000 60 Administration Overheads 40,000 35 The Houstonian production will be sold by manufacturer's representatives who will receive a - commission of 8% of the sale price. No portion of the Japanese office expenses is to be allocated to the Indian subsidiary. You are required to: (1) Compute the sale price per bottle to enable to management to realise an estimated 10% profit on sale proceeds in Huston. Calculate the break-even point in rupee sales on the assumption that the sale price per bottle is $ 14. (1I)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The Heating Division of Swifty International produces a heating element that it sells to its customers for $38 per unit. Its unit variable cost is $23, and its unit fixed cost is $8. Top management of Swifty International would like the Heating Division to transfer 15,400 heating units to another division within the company at a price of $31. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept? Minimum transfer price 23
The Dolomite Division of Manila Bay Corp. produces a high-quality crushed synthetic Dolomite. Unit production costs (based on capacity production of 100,000 units per year) follow: Direct material $50 Direct labor 20 Overhead (20% variable) 10 Other information: Sales price 100 SG&A costs (40% variable) 15 Refer to Dolomite Division of Manila Bay Corp. Assume, for this question only, that the Dolomite Division is producing and selling at capacity. What is the minimum selling price that the division would consider on a "special order" of 1,000 Dolomites on which no variable period costs would be incurred? Solution: Direct Material 50 Direct Labor 20 Overhead 10 SG&A 9 Opportunity Cost 5 Total 94 Please explain how to get the opportunity cost of $5.
The process-control division expects to sell 1,250 process-control units this year. From the viewpoint of Sierra Inc. as a whole, should 1,250 Xcel-chips be transferred to the process-control division to replace circuit boards? Show your computations.
Barkov Bakeries produces deluxe muffins in its manufacturing facility in Florida. Data concerning these products appear below. Cornbread Blueberry Plain Normal annual sales volume 200,000 300,000 500,000 Unit selling price $ 2.50 $ 3.00 $ 2.00 Variable cost per unit $ 1.80 $ 2.00 $ 1.40 Total fixed expenses for the entire company are $2,500,000 per year. All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. The company has no work in process or finished goods inventories due to an extremely effective just-in-time manufacturing system.…
Walton Co. purchases the 400,000 compressors that it installs in its refrigerators from a Chinese company for the price of $26 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier.. However, the company's mechanical engineer is opposed to making the compressors because the production cost per unit is $28 as shown below: Per unit Total Direct material 9.00 Direct labor 7.00 Supervisor's salary 4.50 $18,00,000 Depreciation on machinery 2.50 Rent 1.00 400,000 Variable manufacturing overhead 4.00 $16,00,000 Total production cost 28.00 If Walton Co. decides to make the compressors, a supervisor would have to be hired (at a salary of $18, 00,000) to oversee production. However, the company does not need to purchase any new equipment. The rent charge above is based on space utilized in the plant. The total rent on the factory is $24,00,000 per period. Required: What is the…
Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 20,000 tons of its granular. Because of this year’s mild winter, projected demand for its product is only 15,000 tons. Based on projected production and sales of 15,000 tons, the company estimates the following income using absorption costing. Sales (15,000 tons at $80 per ton) $ 1,200,000 Cost of goods sold (15,000 tons at $60 per ton) 900,000 Gross profit 300,000 Selling and administrative expenses 300,000 Income $ 0 Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive equipment. Direct materials $ 13 per ton Direct labor $ 4 per ton Variable overhead $ 3 per ton Fixed overhead ($600,000/15,000 tons) $ 40 per ton Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and administrative…
Southwest Division offers its product to outside markets for $30. It incurs variable costs of $11 per unit and fixed costs of $37,50040,000 per month based on monthly production of 4,000 units. Northeast Division can acquire the product from an alternate supplier for $31 per unit or from Southwest Division for a transfer price of $30 plus $2 per unit in transportation costs. a. What are the costs and benefits of the alternatives available to Southwest Division and Northeast Division with respect to the transfer of Southwest Division's product? b. How would you answer change if Southwest Division had idle capacity sufficient to cover all of Northeast Division's needs?
Textron Inc. has two divisions, Kelly Aerospace, and Cessna Aircraft. The company is attempting to negotiate a transfer price for Kelly's aircraft magnetos sale to Cessna. Given the following data, calculate highest acceptable transfer price. Kelly Aerospace Kelly annual production capacity 43,500 magnetos Kelly's annual sales to outside customers 42,900 magnetos Variable cost per magneto $93.00 Fixed cost per month $320,000 Kelly's selling price to outside customers $110.00 per magneto Cessna $110.00 Current purchase price from other supplier Annual usage per magneto 3,500 magneto Textron Inc. has two divisions, Kelly Aerospace, and Cessna Aircraft. The company is attempting to negotiate a transfer price for Kelly's aircraft magnetos sale to Cessna. Given the following data, calculate lowest acceptable transfer price; round to the nearest penny. Kelly Aerospace Kelly annual production capacity 43,500 magnetos Kelly's annual sales to outside customers 41,000 magnetos Variable cost per…
The Eastern division sells goods internally to the Western division of the same company. The quoted external price in industry publications from a supplier near Eastern is $200 per ton plus transportation. It costs $20 per ton to transport the goods to Western. Eastern's actual market cost per ton to buy the direct materials to make the transferred product is $100. Actual per ton direct labor is $50. Other actual costs of storage and handling are $40. Assuming there is an excess capcity in the Eastern Division, the minimum and maximum transfer price are: