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   $52,000   Cost of goods sold 10,290   27,560   Gross profit $10,710   $24,440   Utility expenses 1,050   3,640   Wages expense 5,460   10,400   Costs allocated from corporate 2,100   15,080   Total expenses $8,610   $29,120   Operating income/(loss) in dollars $2,100   -$4,680   Operating income/(loss) in percentage 10 % -9 % 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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   $52,000  
Cost of goods sold 10,290   27,560  
Gross profit $10,710   $24,440  
Utility expenses 1,050   3,640  
Wages expense 5,460   10,400  
Costs allocated from corporate 2,100   15,080  
Total expenses $8,610   $29,120  
Operating income/(loss) in dollars $2,100   -$4,680  
Operating income/(loss) in percentage 10 % -9 %

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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