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 $22,000 $51,000 Cost of goods sold 10,340 26,520 Gross profit $11,660 $24,480 Utility expenses 880 3,060 Wages expense 5,720 10,710 Costs allocated from corporate 1,980 14,790 Total expenses $8,580 $28,560 Operating income/(loss) in dollars $3,080 -$4,080 Operating income/(loss) in percentage 14 % -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	$22,000		$51,000
Cost of goods sold	10,340		26,520
Gross profit	$11,660		$24,480
Utility expenses	880		3,060
Wages expense	5,720		10,710
Costs allocated from corporate	1,980		14,790
Total expenses	$8,580		$28,560
Operating income/(loss) in dollars	$3,080		-$4,080
Operating income/(loss) in percentage	14	%	-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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