Bedtime Bedding Company manufactures pillows. The Cover Division makes covers and the Assembly Division makes the finished products. The covers can be sold separately for $5.00. The pillows sell for $6.00. The information related to manufacturing for the most recent year is as follows: Cover Division manufacturing costs $6,000,000 Sales of covers by Cover Division 4,000,000 Market value of covers transferred to Assembly 6,000,000 Sales of pillows by Assembly Division 7,200,000 Additional manufacturing costs of Assembly Division 1,500,000 Compute the operating income for each division and the company as a whole. Use market value as the transfer price. Are all managers happy with this concept? Explain
Bedtime Bedding Company manufactures pillows. The Cover Division makes covers and the Assembly Division makes the finished products. The covers can be sold separately for $5.00. The pillows sell for $6.00. The information related to manufacturing for the most recent year is as follows:
|
Cover Division |
$6,000,000 |
|
Sales of covers by Cover Division |
4,000,000 |
|
Market value of covers transferred to Assembly |
6,000,000 |
|
Sales of pillows by Assembly Division |
7,200,000 |
|
Additional manufacturing costs of Assembly Division |
1,500,000 |
Compute the operating income for each division and the company as a whole. Use market value as the transfer price. Are all managers happy with this concept? Explain
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