Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Capacity in units $ $ $ es is es 60 42 8 20,000 Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $63 from an outside supplier for a component part that is comparable to the one that Division A makes
Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Capacity in units $ $ $ es is es 60 42 8 20,000 Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $63 from an outside supplier for a component part that is comparable to the one that Division A makes
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please do not give solution in image format thanku
Transcribed Image Text:Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one
product that it manufactures and sells on the outside market:
Selling price per unit (on the outside market)
Variable cost per unit
Fixed costs per unit (based on capacity)
Capacity in units.
60
42
8
20,000
Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly-designed product.
Division B has received a quote of $63 from an outside supplier for a component part that is comparable to the one that Division A
makes.
Multiple Choice
$
$
$
Also assume that the company's divisional managers are evaluated based on their division's profits and that Division A is currently
selling 17,000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and Division B
purchases 4,000 component parts from an outside supplier, what would be the effect on the company's profits?
Profits would decrease by $62,000
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 3 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