Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packaging buys components from Production and assembles them for sale. Production sells many components to third parties in addition to Packaging. Selected data from the two operations follow: Capacity (units) Sales pricea Variable costs b Fixed costs Production 51,000 $ 260 $116 $ 30,000,000 a For Production, this is the price to third parties. b For Packaging, this does not include the transfer price paid to Production. a. Optimal transfer price b. Transfer price c. Transfer price Packaging 25,500 $ 800 $ 308 $ 18,000,000 Required: a. Current output in Production is 25,500 units. Packaging requests an additional 6,600 units to produce a special order. What transfer price would you recommend? b. Suppose Production is operating at full capacity. What transfer price would you recommend? c. Suppose Production is operating at 47,700 units. What transfer price would you recommend? per unit per unit per unit

Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packaging buys components from Production and assembles them for sale. Production sells many components to third parties in addition to Packaging. Selected data from the two operations follow: Capacity (units) Sales pricea Variable costs b Fixed costs Production 51,000 $ 260 $116 $ 30,000,000 a For Production, this is the price to third parties. b For Packaging, this does not include the transfer price paid to Production. a. Optimal transfer price b. Transfer price c. Transfer price Packaging 25,500 $ 800 $ 308 $ 18,000,000 Required: a. Current output in Production is 25,500 units. Packaging requests an additional 6,600 units to produce a special order. What transfer price would you recommend? b. Suppose Production is operating at full capacity. What transfer price would you recommend? c. Suppose Production is operating at 47,700 units. What transfer price would you recommend? per unit per unit per unit

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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Tennair Corporation manufactures cooling system components. The company has gathered the following information about two of its customers: Evans Equipment and Rogers Refrigeration. Evans Equipment Sales revenue Rogers Refrigeration $ 160,000 61,000 Cost of goods sold General selling costs $ 229,000 102,000 37,000 23,800 28,500 General administrative costs 17,850 Cost-driver data used by the firm and traceable to Evans and Rogers are: Customer Activity Sales activity Order taking Special handling Special shipping Customer Activity Sales activity Order taking Special handling Special shipping Cost Driver Sales visits Sales orders Units handled Shipments Evans Equipment 12 visits 31 orders 460 units. 33 shipments Pool Rate $ 970 278 44 460 Rogers Refrigeration 9 visits 36 orders 410 units 44 shipments Required: A. Perform a customer profitability analysis for Tennair. Compute the gross margin and operating income on transactions related to Evans Equipment and Rogers Refrigeration.
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A manufacturing company decides which of three mutually exclusive products to make in its factory on the basis of maximising the company's throughput accounting ratio. Current data for the three products is shown in the following table: Product X Product Y Product Z $20 Selling price per unit $60 $40 Direct material cost per unit $40 $10 $16 Machine hours per unit 10 20 2.5 Total factory costs (excluding direct materials) are $150,000. The company cannot make enough of any of the products to satisfy external demand entirely as machine hours are restricted. Which of the following actions would improve the company's existing throughput accounting ratio? Increase the selling price of product Z by 10% Increase the selling price of product Y by 10% Reduce the material cost of product Z by 5% O Reduce the material cost of product Y by 5%
Subject: acounting
Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packaging buys components from Production and assembles them for sale. Production sells many components to third parties in addition to Packaging. Selected data from the two operations follow: Capacity (units) Sales price Variable costsb Fixed costs a For Production, this is the price to third parties. b For Packaging, this does not include the transfer price paid to Production. Suppose Production is located in Country A with a tax rate of 30 percent and Distribution in Country B with a tax rate of 10 percent. All other facts remain the same. a. Optimal transfer price b. Transfer price c Transfer price Required: a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer price would you recommend? to search b. Suppose Production is operating at full capacity. What transfer price would you…
Activity Base Costing (ABC) Gulf Mining LLC produces three diferent products and sells them in bulk to smaller retailers. It's managers are concerned that the company's profit is not as high as its competitors. They believe they fall in profits could be caused due to the company's uncompetitive selling price(s), for one or more product, and losses on other products. Details of the company's costs and selling prices are as follows; Products Selling Price Direct Costs Labour Direct Material - Aqua (Water) Total Direct Cost Units produced Activities associated with the overheads are: Financial Management Financial Management-1/Aut Face-Pack OMR 90 10 Hand-gel OMR 120 Details Depreciation Purchasing Expenses Direct Material - Aqua (Water) delivery inspection costs Labour hours Currently the company uses the traditional method of allocating indirect overheads but is considering using the ABC method for increasing the accuracy. The company's indirect overheads are as follows: 24 28 200 3000…
Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P20 and P5, respectively The Division can sell this item to external domestic customers for P36 or, alternatively, transfer the product to the company's Division B. Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the general transfer-pricing rule. •What is the most that the Division B would be willing to pay the Division A for one unit? • If Division A had excess capacity, what transfer price would the Division's management set? · If Division A had no excess capacity, what transfer price would the Divisions management set? If Division A had no excess capacity, what transfer price would the Divisions management set assuming that Division A was able to reduce the variable cost of internal transfers by P4 per unit
Anstell Corporation operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow: Capacity (units) Sales price* Variable costs + Fixed costs Manufacturing 250,000 $ 280 $ 112 $ 100,000 a. Transfer price b. Transfer price Marketing 125,000 $910 For Manufacturing, this is the price to third parties. t For Marketing, this does not include the transfer price paid to Manufacturing. per unit per unit $ 336 $ 720,000 Required: a. Current output in Manufacturing is 125,000 units. Marketing requests an additional 25,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? c. Suppose Manufacturing is operating at 230,000 units. What transfer…
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