Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). The income statement for Marley's Manufacturing is shown below: Marley's Manufacturing Income Statement Month Ending August 31, 2018 Dept. A Dept. B Sales $21,000 $50,000 Cost of goods sold 10,290 26,000 Gross profit $10,710 $24,000 Utility expenses 1,050 3,500 Wages expense 5,460 10,000 Costs allocated from corporate 1,890 14,500 Total expenses $8,400 $28,000 Operating income/(loss) in dollars $2,310 -$4,000 Operating income/(loss) in percentage 11 % -8 % Assume the market price for the items your department purchase is 15% below what you are being charged by department A of Marley’s Manufacturing. Determine the operating income for department B, assuming department A “sold” department B 1,000 units during the month and department A reduces the selling price to the market price. Round your percentage answer to one decimal place. New operating income/(loss) for department B in dollars $fill in the blank 1 New operating income/(loss) for department B in percentage fill in the blank 2 %

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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Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales).

The income statement for Marley's Manufacturing is shown below:

Marley's Manufacturing Income Statement Month Ending August 31, 2018
	Dept. A	Dept. B
Sales	$21,000		$50,000
Cost of goods sold	10,290		26,000
Gross profit	$10,710		$24,000
Utility expenses	1,050		3,500
Wages expense	5,460		10,000
Costs allocated from corporate	1,890		14,500
Total expenses	$8,400		$28,000
Operating income/(loss) in dollars	$2,310		-$4,000
Operating income/(loss) in percentage	11	%	-8	%

Assume the market price for the items your department purchase is 15% below what you are being charged by department A of Marley’s Manufacturing.

Determine the operating income for department B, assuming department A “sold” department B 1,000 units during the month and department A reduces the selling price to the market price. Round your percentage answer to one decimal place.

New operating income/(loss) for department B in dollars	$fill in the blank 1
New operating income/(loss) for department B in percentage	fill in the blank 2	%

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